Puerto Rico Electric Power Authority, a public corporation that's preparing a debt restructuring plan, won't get much immediate benefit from plunging oil prices, according to Moody's Investors Service.
In a report released Thursday, Moody's vice presidents Richard Donner, Emily Raimes, and Ted Hampton said PREPA will miss out on any near-term benefit because it automatically passes on the savings from lower oil prices to its rate payers.
PREPA, which had $8.3 billion of revenue bonds outstanding as of August, gets 61% of its electricity from burning oil. The price per barrel of Brent crude has fallen to about $48 a barrel Thursday from $115 in June.
In the long term the decline in oil prices may benefit all of Puerto Rico, including PREPA, if the decline continues and helps spur economic growth, the analysts said. The price decline should lead to residents having more disposable income, which should in turn stimulate the economy.
"Lower fuel costs and rates might also create room for PREPA to raise its base rate," the analysts said. "Lower fuel costs should help improve PREPA's working capital position."
PREPA successfully made debt service payments on Jan. 1, 2015, they said.
The analysts endorse PREPA's work to shift from oil as a means to generate electricity.
