- UPDATE: Gov. Alejandro Garcia Padilla signed the Revitalization Act late Tuesday night after being passed by both legislative bodies in Puerto Rico. Utility Dive's original post on passage in the House follows:
- On Monday, the Puerto Rico House of Representatives amended and passed legislation approved in the Senate last week to allow the island's electric utility to restructure nearly $9 billion in debt. A joint committee from both chambers will now work to reconcile the two versions of the bill.
- If approved, the the Puerto Rico Electric Power Authority (PREPA) Revitalization Act would allow implementation of a restructuring support agreement (RSA) reducing the utility’s $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 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. That agreement expires February 23. Without the RSA, the $9 billion debt is due July 1, 2016.
The RSA was finalized in late December with the Ad Hoc Group. It is made up of traditional municipal bond investors, such as Oppenheimer and Franklin Templeton, as well as hedge funds, such as Blue Mountain and Knighthead, along with fuel line lenders and the territory’s Government Development Bank (GDB). Fuel line lenders’ debt and the GDB debt can be exchanged for the securitization bonds or for loans with comparable terms.
The utility continues to negotiate with monoline bond insurers such as Assured Guaranty and National Public Finance Guarantee, which specialize in backing public utilities, and other supporting creditors.
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.
Last month, PREPA was granted an extension from bondholders when lawmakers failed to pass the Revitalization Act by an earlier Jan. 22 deadline. The utility struck a deal with the banks that finance its fuel purchases to continue providing power while lawmakers work on the bill.