The Puerto Rico Electric Power Authority, which supplies most of the island’s electricity, used reserve funds to pay investors July 1, according to a Municipal Securities Rulemaking Board filing.
The utility, known as Prepa, paid bondholders $417.6 million on maturing bonds and interest, according to a statement from the Government Development Bank, which manages the commonwealth’s finances.
The provider used about $41.6 million from reserves for that payment, according to a notice today on MSRB’s Electronic Municipal Market Access website, known as EMMA.
Investors were doubting Prepa’s ability to make the July 1 payment after it took $100 million from its capital fund in May to purchase fuel. The utility must repay $671 million of bank lines of credit by mid-August and doesn’t have the cash to pay the full amount, Judith Waite, a Standard & Poor’s analyst, wrote in a report.
Prepa investors were paid on time and in full, Barbara Morgan, a New York-based spokeswoman for the Government Development Bank, wrote in an e-mail after EMMA posted the event notice.
“We continue to provide our customers with uninterrupted service and have more than sufficient liquidity to continue to pay our employees and suppliers on a timely basis,” Morgan said.
Prepa, with $8.6 billion of debt, is a prime candidate among commonwealth entities to restructure its obligations under a new law Governor Alejandro Garcia Padilla signed last month that allows certain public corporations to negotiate with creditors to reduce their debt loads.
The three largest rating companies give the utility a junk grade. About 70 percent of Prepa’s debt doesn’t have bond insurance, according to data compiled by Bloomberg.
Prepa uses oil to produce about 60 percent of its electricity, according to S&P. The utility wants to reduce that to 2 percent in 2017 by switching to natural gas, Juan Alicea Flores, Prepa’s executive director, said in May at a conference in San Juan. Puerto Rico’s electricity costs are double that on the U.S. mainland.
With 1.48 million customers and $4.94 billion in revenue in 2012, Prepa is the biggest U.S. public power utility, according to the American Public Power Association.