The Puerto Rico Electric Power Authority, which is scheduled to present a business plan to bond holders on Monday, will use requests for proposals to determine who will fund and construct capital projects, a government official said.
PREPA is expected to present a business plan to its forbearing creditors on Monday. The creditors have offered $2 billion in financing for capital investments and have indicated that General Electric should build a power plant. The authority's chief restructuring officer, Lisa Donahue, while criticizing elements of that plan, said the $2 billion investment was roughly what was needed.
Separately, York Capital Management, NRG Energy, and ITC Holdings Corp. have offered Puerto Rico's governor an investment of $3 billion to construct PREPA generating and distribution facilities, according to a report in Caribbean Business.
Melba Acosta Febo, president of the Government Development Bank for Puerto Rico, told The Bond Buyer in an email that an RFP process will decide who will provide financing and construct projects for PREPA.
"At this stage of the process, we are not entertaining any particular proposal regarding our modernization plans," Acosta Febo said. "We are focused on discussing our plan to transform PREPA and reach a fair agreement with bondholders.
"We are aware that several groups have expressed interest in participating in the modernization plan of PREPA," she continued. "We are encouraged as many private groups have expressed their interest. At the proper time, all interested parties will be able to participate in an open competitive bidding process (RFP). Proposals like this one will be welcome."
Donahue is expected to submit a comprehensive plan for PREPA Monday, including a possible restructuring of the authority's debt. As of Jan. 31, PREPA had about $9.2 billion in total debt, of which about $8.4 billion was bond debt. A default on the bond debt would be the biggest in U.S. municipal bond history.
The $3 billion investment plan made public Thursday would involve a total investment of $3.5 billion, with $3 billion from the three outside companies and $500 million from PREPA, according to Caribbean Business. The three-company coalition calls itself the Puerto Rico New Generation Partners.
The coalition is proposing building up to 1500 megawatts of natural gas fired capacity and 400 megawatts of utility-scale solar facilities. The coalition would own the facilities. PREPA would commit to buy power from it for 30 years.
The Puerto Rico House of Representatives last week reported PREPA's past misuse of bond proceeds in a post on its website, which related testimony to the Committee on Small and Medium Businesses, Commerce, Industry and Telecommunications.
PREPA director of the division of finances Luis Figueroa Báez told the panel that, since 2000, most bond proceeds have been used to pay off debt. A smaller amount of the proceeds has been used for construction plans and improvements in generating plants. The bond issues had been advertised as intended to be used for capital planning and construction.
For example, of the $4.5 billion in bonds PREPA sold 2009 to 2012 only $807 million was used for construction, according to Figueroa Báez. The rest was used to pay off debts to bondholders and the GDB.
