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Puerto Rico Governor Asks to Renegotiate Power-Company Debt Plan

Puerto Rico Governor Asks to Renegotiate Power-Company Debt Plan

Puerto Rico Governor Pedro Pierluisi said he’s in favor of renegotiating a 2019 deal that would pull the island’s public power company, Prepa, out of bankruptcy and repay billions to bondholders.

During a meeting of the Financial Oversight and Management Board Friday, Pierluisi said conditions in the U.S. territory of 3.3 million people had changed significantly since the restructuring support agreement, or RSA, was hammered out three years ago.

In particular, the growth of electric vehicles and signs of economic recovery mean that some surcharges that the 2019 agreement contemplates might not be necessary, he said.

Read more: Puerto Rico Utility Bondholders Seek Mediation on Debt Plan

“Nobody should tie themselves to the RSA,” Pierluisi told the board. “There are circumstances, it’s worth repeating, that require a renegotiation.”

Puerto Rico has some of the most expensive and least reliable energy of any U.S. jurisdiction. Hurricane Maria in 2017 knocked out power to the entire island and it took almost a year for service to be completely restored. Since 2021, the grid has been in the hands of a U.S.-Canadian joint venture called Luma. But Prepa -- the Puerto Rico Electric Power Authority -- still runs most of the island’s power plants.

One of the U.S.’s largest public utilities, Prepa has been in talks since 2014 with creditors on how to restructure $9 billion in debt, part of the island’s broader reckoning as it contended with a moribund economy and the legacy of years of excessive borrowing. 

Last week, a group of bondholders asked for court-ordered mediation to help craft an alternative debt plan if the island’s lawmakers fail to approve the 2019 deal. But Puerto Rico’s congress has repeatedly said that deal is no longer viable. 

Members of the majority Popular Democratic Party plan to meet over the weekend to discuss alternatives. Even so, the oversight board has suggested it’s willing to approve the deal without lawmaker support.

“We need the legislature to rise above the demagoguery and pass the RSA,” Justin Peterson, a member of the oversight board, said Friday. “If they don’t do it, it’s not going to prevent the board from finishing the restructuring of Prepa. We are going to do it, it’s just going to cost more.”

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