OVERSIGHT BOARD CERTIFIES REVISED PREPA FISCAL PLAN; WILL AMEND THE PREPA DEBT RESTRUCTURING PLAN
Successful Transformation of Puerto Rico’s Energy System; Includes Significantly Higher Expense Projections And a 60% Decline in Electricity Consumption; Outlines Deployment of $15 Billion in FEMA Funds; Reduces PREPA’s Debt Sustainability to $2.5 Billion
San Juan, PR – June 23, 2023 – The Financial Oversight and Management Board for Puerto Rico announced that its members today certified a new Fiscal Plan for the Puerto Rico Electric Power Authority (PREPA) that reflects updated projections for electricity demand and costs, and outlines the efficient deployment of more than $15 billion in federal funding to make significant investments in the energy system.
The updated projections on energy consumption developed by PREPA, Luma Energy LLC, and Genera PR reflect higher costs and other factors such as households and businesses continuing to switch to more energy efficient appliances and adding rooftop solar. The results impact the Fiscal Plan’s debt sustainability analysis.
The Oversight Board will amend the Plan of Adjustment to restructure more than $10 billion of debt and other claims against PREPA before pension claims. It will provide for the issuance of consideration worth approximately $2.5 billion to creditors. Given the updated projections, this reduction from the currently filed Plan of Adjustment is necessary so PREPA can provide essential electricity to the people and businesses of Puerto Rico at sustainable rates. The Oversight Board has not yet determined the revised charge to pay for PREPA’s legacy debt.
“The guiding principle for all debt restructurings is sustainability,” said the Oversight Board’s Chair David Skeel. “The goal is to stabilize PREPA. The Oversight Board has been analyzing carefully and dispassionately how much debt PREPA can pay and made that determination strictly based on the most recent available data. The Fiscal Plan the Oversight Board certified provides a roadmap for a viable energy system for Puerto Rico that will deliver more reliable and cleaner electricity to residents and business.”
The Oversight Board’s Executive Director Robert F. Mujica Jr. said, “The Fiscal Plan has defined the successful transformation of Puerto Rico’s energy system, a transformation that has made significant progress by breaking the cycle of mismanagement, underinvestment, and underperformance of PREPA’s inefficient monopoly. PREPA is not done. Electricity is not yet reliable. But the building blocks are in place. The implementation of the Fiscal Plan so far created an energy system that can and will improve over time.”
“The top priority now is to end PREPA’s bankruptcy and to enable PREPA to move as expeditiously as reasonably possible towards the renewable energy goals defined in Act 17-2019,” Mujica said.
The new Fiscal Plan reflects higher fuel costs than previously projected, expenses related to the energy efficiency programs mandated by the Puerto Rico Energy Bureau (PREB) such as future discounts and rebates to encourage customers to switch to more energy efficient appliances and light bulbs, and higher pension cost.
Meanwhile, the projections PREPA and LUMA submitted to the Oversight Board for the new Fiscal Plan includes a significant decline in the net load for the period between the coming fiscal year 2024 and fiscal year 2050. Net load is the energy delivered by the grid to PREPA customers. This decline is equivalent to a compounded decrease of roughly 60% by fiscal year 2050. The projections reflect population trends, the mandated energy efficiency initiatives, and an increase in distributed generation through the installation of rooftop solar and other renewable power generation. The decline is offset to some extent by the projected accelerating adoption of electric vehicles.
The Fiscal Plan projects significant installation of new solar capacity. Between fiscal years 2025 and 2027, 3,868 megawatt (MW) of new utility-scale solar capacity is expected to be installed. This installation will facilitate PREPA’s attempt to comply with Act 17.
PREPA has been awarded over $12 billion of federal funding for permanent work, approximately $2.4 billion for emergency work, approximately $600 million for management costs, and approximately $2.3 million CDBG funding. LUMA plans to spend over $5 billion of capital within its improvement programs to strengthen Puerto Rico’s deficient grid.
For the PREPA Fiscal Plan, please visit https://oversightboard.pr.gov/fiscal-plans/