Puerto Rico Utility's Creditors Extend Deadline for Rate Planby
New customer surcharge would repay restructuring bonds
Prepa wants to cut $9 billion of debt through a bond exchange
Puerto Rico won another week to submit a proposed rate fee to the commonwealth’s energy commission, a charge that would repay debt used to restructure about $9 billion owed by its main power utility.
Puerto Rico Electric Power Authority creditors agreed to give officials until April 7 to file their petition to create a new customer fee, called a securitization charge, according to a statement from the utility on Wednesday. A December agreement between Prepa, as the utility’s known, bondholders and bond-insurance companies was set to expire unless the energy commission received the rate petition. This is the contract’s fourth extension this year.
The restructuring would be the first step in the commonwealth’s plan to reduce its $70 billion debt load after Puerto Rico and its agencies borrowed for years to fill budget shortfalls. The island’s economy has declined in the past decade and it has already defaulted on some agency debt. Prepa faces a $1.13 billion payment to investors and lenders on July 1 that it won’t be able to pay without the creditor agreement.
The House Natural Resources Committee on Tuesday made public a discussion draft of a bill that would establish a federal control board to oversee Puerto Rico’s budgets and manage any debt restructurings. The legislation may include language that would protect the deal already in place between Prepa and its creditors because the parties have invested time and energy to reach an accord, a committee aide told reporters during a conference call on Tuesday.
The commonwealth’s three-member energy commission will have 75 days to review the new fee once it’s submitted. Prepa needs the proposed securitization charge to be approved so it can execute its restructuring deal under which investors agreed to take a 15 percent loss by exchanging their bonds for new securities. Revenue from the proposed securitization fee would repay the new debt.
Prepa and its creditors agreed to the debt alternation after first signing a pact in August 2014 that kept negotiations out of court. The restructuring will enable the utility to rehabilitate a system that relies on petroleum to produce electricity.