The Puerto Rico Oversight Board, looking to accelerate restoration of power to the hurricane-ravaged island, said it would appoint a new leader for the Puerto Rico Electric Power Authority.

The Oversight Board’s official statement late on Wednesday indicated Noel Zamot, in the new role of chief transformation officer, would lead the authority currently managed by executive director Ricardo Ramos. Gov. Ricardo Rosselló released a statement saying the board’s appointment of Zamot was an illegal undermining of the democratic process and that his government would challenge it.

A Puerto Rico Electric Power Authority vehicle helps Levittown residents after Hurricane Maria.
A Puerto Rico Electric Power Authority vehicle helps Levittown, P.R., residents after Hurricane Maria.

On Sept. 20 Hurricane Maria traveled across Puerto Rico, knocking out nearly all electrical service on the island, threatening to devastate the economy and further undercut the government's ability to repay its bonds. As of Thursday, almost three quarters of PREPA's customers remained without service, and the power restoration efforts were mired in political controversy.

“Let to their own devices, I think the market is dubious that [Puerto Rico] elected officials have the discipline to make the cuts necessary and deal with entrenched groups to spread some of the pain,” said Howard Cure, Evercore Wealth Management director of municipal research. “An oversight board will undermine the agenda of elected officials but may be the only way to achieve long-term stability.”

Noel Zamot PREPA manager chief transformation officer
Noel Zamot

According to the board’s statement, board executive director Natalie “Jaresko said it is common practice in reorganization cases for a debtor in possession to name a chief restructuring officer to effectively manage the entity while it is in bankruptcy.”

From the fall of 2014 to the start of this year Lisa Donahue of AlixPartners had the title of chief restructuring officer of PREPA. However, she worked with the PREPA executive directors. The board’s labeled its statement on Zamot with the words “Emergency Manager.” Zamot may have greater power relative to Ramos than Donahue did relative to the then existing executive directors.

On July 2 the board initiated Title III bankruptcy proceedings for PREPA’s roughly $9 billion in outstanding debt. This preceded its monetary default on a July 3 bond payment.

“I am fully committed to bringing the resources necessary to restore electricity to the people of Puerto Rico as quickly as possible, and to reactivate the economy and bring normalcy to the island,” Zamot said.The board may seek to have Title III bankruptcy judge Laura Taylor Swain approve the appointment as part of the Title III process.

The Puerto Rico Oversight, Management, and Economic Stability Act is “is clear and precise in that the management of the Government of Puerto Rico and its public corporations rests exclusively on democratically elected officials, appointed under the laws of Puerto Rico,” the governor’s office said in its statement.

“The people of Puerto Rico have entrusted to their elected government the sound administration of their funds and governmental entities; and the Government of Puerto Rico will be jealous in defending the people of any action that seeks to undermine this process, [no matter] whence it comes.”

In July the Oversight Board named Zamot as Puerto Rico's revitalization coordinator. In this role he was to attract infrastructure investment. The board didn't immediately comment as to whether he would be retaining this role.

Zamot served for 25 years in the U.S. Air Force, including management of energy and infrastructure projects. He also worked in the private sector, providing engineering expertise to the Defense Department and launching a successful business, according to the board.

Zamot holds a bachelor’s degree from the Massachusetts Institute of Technology. He also has a master’s degree in business administration from MIT, a master’s degree in aerospace engineering from the University of Michigan, and a management degree from Escuela de Administración de Empresas para Graduados, based in Lima, Peru.

According to the El Vocero news website, Zamot said he would seek the assistance of the American Public Power Association to bring repair brigades to Puerto Rico.

The board’s appointment of Zamot comes amid a hubbub over PREPA’s decision to hire Whitefish Energy to do the electrical restoration. Some members of Congress and members of Puerto Rico’s political opposition have questioned the wisdom of hiring Whitefish when it was a very small company prior to the contract. Others have noted reports that Whitefish’s owners were significant contributors to the campaign of Donald Trump, and have questioned the integrity of the contract awarding process.

In the aftermath of what U.S. House Minority Leader Nancy Pelosi, D.-Calif., described as a questionable contract to Whitefish, she said “it is appropriate that the PROMESA board chose to step in and provide the management and oversight necessary to answer these questions [about the Whitefish contract] on behalf of the American people.”

Given PREPA’s inability to restore power by itself, its decision to forgo aid from APPA, and the questionable Whitefish contract, it is “completely appropriate for the board to step in by making this appointment [of Zamot],” said U.S. Rep. Nydia Velázquez, D.-N.Y..

Puerto Rico Oversight Board members met with Rep. Rob Bishop, R.-Utah, Chairman of the U.S. Natural Resources Committee (which oversees the territories), this week, according to Bishop spokesperson. Bishop has also released a statement questioning the Whitefish contract.

On Wednesday evening Gov. Rosselló asked the U.S. Office of Management and Budget to audit the contract and to review compliance with all Puerto Rico and federal laws. He added that after a three hour conference call with representatives of the Federal Emergency Management Agency and PREPA’s law firm, Greenberg Traurig, the FEMA officials said the contract seemed to be 100% compliant with FEMA regulations.

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