Puerto Rico Electric Power Authority, nearing a midnight deadline in talks with its forbearing bondholders, was hit with an ethics complaint Tuesday by a leader of Puerto Rico's primary opposition party.
Jenniffer González Col-n, the speaker of Progressive National Party in the Puerto Rico House of Representatives, accused financial services firm Millstein & Co. of a conflict of interest in its dealings with the authority as she filed ethics complaints against PREPA over the award of an $870 million fuel supply contract to Freepoint Commodities.
Freepoint is owned by Stone Point Capital, which counts Millstein & Co. among its partners, González Col-n said. The Government Development Bank for Puerto Rico has hired Millstein to advise it on restructuring Puerto Rico's debt and possibly privatizing PREPA, she said.
Millstein & Co. chief executive officer Jim Millstein told The Bond Buyer that his firm hadn't done anything wrong and that it had nothing to do with the negotiations for PREPA's new oil contract. PREPA announced the contract with the oil supplier Freepoint Commodities last week.
González Col-n said, "Millstein & Company has had access to privileged and confidential information on prices and rates of competing suppliers of goods and services to PREPA, as part of its advisory service to the Government in the interest of a possible debt restructuring or privatization. That this privileged or confidential information could have been used to favor one of its subsidiaries raises an obvious issue of conflict of interest between the functions of Millstein & Company as counsel with the Government Development Bank and PREPA, and the signing of a contract with one of its subsidiaries, as would be Freepoint Commodities, without an open bidding process, regardless of what is the final amount of the contract."
González Col-n said she had filed complaints against PREPA with the Puerto Rico Department of Justice, Office of Government Ethics, and the Office of the Comptroller.
Millstein said that he believed that Freepoint had engaged in a bidding process for the oil contract and that until Tuesday he knew nothing about PREPA's efforts to seek a new oil supplier. He said he would cooperate with any investigation.
For its part, PREPA released a statement that said: "PREPA hereby confirms that the recent #6 fuel supply contract process was handled in a transparent and routine manner, in accordance with all applicable rules and procedures.… Due to the financial distressed environment at PREPA during the restructuring process, the teams strategically selected a request-for-proposals process in order to attract more suppliers."
The authority said the competitive process was led by its procurement team, with assistance from AlixPartners, which is advising on the restructuring. The authority's forbearance agreement with creditors ends at 11:59 p.m. Tuesday.
"The results of this competitive process were good for PREPA and the people of Puerto Rico, allowing PREPA to enter into a new contract with Freepoint to supply #6 fuel that is forecasted to save PREPA $25 million in decreased fuel adder charges during its initial one-year term, and will significantly improve PREPA's working capital position as a result of improved credit terms," PREPA said. "Millstein & Co. was not involved in the selection and had no discussions with PREPA or its advisors about the RFP process."
