- Puerto Rico Electric Power Authority (PREPA) obtained another week to submit a petition to regulators for a securitization charge on ratepayers to help restructure nearly $9 billion in debt, Bloomberg reports.
- If approved by the Puerto Rico Energy Commission (PREC), the new charge would help PREPA to underwrite the debt restructuring deal it reached with bondholders and bond-insurance companies in January.
- The regulators have 75 days to approve the petition; if approved, the securitization fee is the first step the Commonwealth will take to restructure some $70 billion in total debt.
Puerto Rico's debt woes came to a head this year as PREPA came dangerously close to defaulting on its debt as it failed to meet deadlines to submit proposals to restructure nearly $9 billion in debt.
Finally Gov. Alejandro Garcia Padilla signed the PREPA Revitalization Act into law on February, which mapped out how PREPA would repay its creditors.
The act would allow implementation of a restructuring support agreement (RSA) reducing the utility’s nearly $9 billion debt. The bill also contains several provisions central to how PREPA, the U.S. island territory’s public utility and only electricity provider, delivers power.
The Revitalization Act would also impose changes to the utility’s governance and sustain the role of the newly–created Puerto Rico Energy Commission (PREC) in regulating it.
Funds made available through the restructuring could be used to move PREPA to more natural gas and renewables generation and away from the dependence on expensive fuel oil electricity generation that has contributed to its financial difficulties.
The RSA allows PREPA to exchange debt owed to an Ad Hoc Group, representing majority of PREPA’s bondholders, for new securitization notes valued at 85% of their existing claims. The restructuring deal is expected to reduce the utility's obligations by $600 million and postpone another $700 million-plus of its debt for five years. It also includes new standards for operations, a proposed new rate structure and an investment plan.