July 1, 2020 Read More →

U.S. corporations benefitting from PREPA rebuilding, but is Puerto Rico?

Huffington Post:

Puerto Rico Electric Power Authority, the state-owned power monopoly, has awarded $4.4 billion in contracts to companies hired to repair the extensive damage to the island’s aging electrical grid. But outages are an enduring and lethal fact of life in Puerto Rico, where the grid remains fragile. An earthquake in January 2020 plunged the island into darkness once again, and now they are looking at a hurricane season forecast to be one of the most active in years.

A joint analysis by HuffPost and NBCLX finds that the vast majority of grid reconstruction-related contracts have gone to American firms, including fossil fuel companies, construction firms connected to the Trump administration and consultants such as former New Jersey Gov. Chris Christie (R). Of the publicly available information on deals awarded since 2017, mainland U.S. contractors received roughly 84%, totaling $3.7 billion.

PREPA, meanwhile, is currently hammering out a deal to hand over control of the electrical distribution system for 15 years to a trio of private operators: Houston-based grid manager Quanta Services, North Carolina-headquartered disaster response firm IEM, and ATCO Ltd., a gas firm based in Calgary, Canada. That contract has not yet been released.

The share of contracts directed to companies outside the United States’ largest territorial possession is not necessarily surprising. But the finding raises new questions about who is benefiting most from Puerto Rico’s rebuilding process, stoking century-old tensions over the colonial relationship between the United States and its largest territorial possession, whose decades long debt crisis spurred ongoing and brutal austerity cuts.

Controversies over PREPA’s contracts began just months after the hurricane, when the utility awarded a $300 million contract to Whitefish Energy Holdings, a tiny Montana firm with ties to then-Interior Secretary Ryan Zinke, which months earlier had been on shaky financial grounds. PREPA quickly canceled the contract amid a national firestorm over the deal. But the state-owned power monopoly continued awarding hefty contracts to U.S. companies at prices Puerto Rican union officials say far exceeded what local workers would charge.

Months later, PREPA agreed to pay the Florida-based construction firm MasTec $400 per streetlight it repaired, even though the union proposed to carry out the same work for $60 per light. Yet the total payout of $5 million was dwarfed by the $500 million contract PREPA gave MasTec in May 2018 to restore transmission lines. The deal drew criticism from Puerto Rico’s fiscal control board, the panel of officials Congress put in charge of the island’s public budget in an effort to ensure the territory’s Wall Street creditors were repaid. MasTec did not respond to a request for comment.

Tom Sanzillo, the finance director at the Institute for Energy Economics and Financial Analysis, a nonprofit that researches energy issues, said the deal exemplified the lucrative business opportunity public contracts offer to former politicians looking to cash in on connections to the sitting administration. (Christie, whose relationship with Trump has at times been critical, was among the president’s first rivals in early 2016 to drop out and endorse the former reality TV host.)

Sanzillo, a former acting comptroller for New York State, has spent the past month raising concerns about another eyebrow-raising PREPA contract given to a major Democratic donor. In March 2019, the utility agreed to pay New Fortress Energy, a fracked-gas infrastructure giant founded and run by billionaire Wes Edens, $1.5 billion to convert two units of the utility’s diesel-burning power plant in San Juan to gas. It was the highest price tag of any post-hurricane PREPA deal. But the cost came with an ambitious timeline. New Fortress would have the units up and running by June 2019. The speed with which the company aimed to build the gas infrastructure seemed to support the utility’s claim that fracked gas, a climate-changing fuel that generally produces less toxic air pollution than diesel, would act as a “bridge” to low-emissions renewables and batteries.

New Fortress wasn’t just late on finishing construction. The process that led to the deal was plagued by process irregularities that gave New Fortress “an unfair advantage,” according to the claims in a scathing report from IEEFA and the Puerto Rican watchdog group CAMBIO, based on internal documents released through a lawsuit. The report detailed allegations of how New Fortress submitted an unsolicited proposal and secured meetings with PREPA and its financial adviser, Filsinger Energy Partners, before the utility even drafted its requests for proposal on the project in April 2018.

[Alexander C. Kaufman and Bianca Graulau]

More: Puerto Rico’s troubled utility is a goldmine for U.S. contractors

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