PRASA Endorses Securitization Proposal

The Puerto Rico Aqueduct and Sewer Authority is seeking a new public corporation to sell its bonds, similar to the one that the Puerto Rico Electric Power Authority is also seeking for the same purpose.

On Tuesday PRASA President Alberto Lázaro Castro endorsed Puerto Rico House Bill 2786, according to a PRASA press statement.

PRASA's approval of higher rates in July 2013 was designed to cover operating expenses, debt service through fiscal year 2018, and projected deficits for fiscal years 2016 and 2017. However, the new rates were not designed to produce enough income to cover anticipated capital spending expenses. PRASA expected to sell bonds to cover these needs. However, its efforts to sell a $750 million bond in August failed.

"Despite our efforts and despite our search for solutions to address the financing of the capital improvement program, the authority has been affected by events that have been out of our control," Lázaro said.

Environmental agreements largely dictate the authority's capital improvement program, the authority stated.

Puerto Rico Rep. Rafael "Tatito" Hernández Montañez is sponsoring the bill, which aims to gain an investment grade for any bonds that PRASA would sell through the vehicle.

"The legislature's approval of this [securitization] measure as soon as possible would move us in the right direction and avoid a rate review at this time," Lázaro Castro.

As part of PREPA's agreement with its forbearing creditors, PREPA has promised to get Puerto Rico's government to pass new legislation. PREPA has promised that part of this legislation will be to introduce a new investment grade public corporation to sell bonds for improvements to the electrical system.

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