Puerto Rico’s governor signs law for partial privatization of PREPA

On Wednesday this week, Puerto Rico Gov. Ricardo Rosselló signed a bill to partially privatize the utility Puerto Rico Electric Power Authority (PREPA). The law intends to sell power plants and make a concession of its transmission and distribution system, which could potentially impact the PREPA’s $8.9 billion in outstanding debt. Money from sales would partly be used to contribute to the utility’s pension system. PREPA would likely used proceeds from any sale to pay off a portion of its debt, and also to contribute to its underfunded pension program. 

Moody’s Investors Service Vice President Rick Donner said he believed there would be considerable private equity interest in purchasing or leasing PREPA assets. He also said that the involvement of private equity is likely to lower electrical costs.

“The bill that Governor Rosselló of Puerto Rico signed today essentially authorizes the governor to proceed with a ‘market sound[ing]’ and identify any and all potential private sector interest in the development of a new energy system in Puerto Rico,” said Puerto Rico Senate Minority Leader Eduardo Bhatia in an email. “Notable is that the bill does not authorize any sale before the Puerto Rico legislature prepares within 180 days a statement of public policy specifically mandating what the new system will look like in 30 years. Bhatia continues that the policy may be similar to Hawaii’s 2045 energy plan and likely include a decentralization of generation into 15 microgrids with additional solar energy.