With less than two weeks left for the Puerto Rico Electric Power Authority (PREPA) to pay over $453 million to its bondholders, the Fiscal Oversight Board has not yet finished the analysis of the Restructuring Support Agreement (RSA) of that public corporation, which has unleashed a confrontation between the federal entity, several Congress members and senators of the United States.
This power struggle, that El Nuevo Día unveiled this week, scaled yesterday when the president of the House Natural Resources Committee, Rob Bishop (R-Utah), seemed to have accused the Board of adopting “delaying tactics” with the RSA and acting against PROMESA federal law. That, raising to the point where the Congress member told the federal organization that it could lose “the trust” of that legislative body.
“The fear is that this results in adverse and severe consequences for the Island, including the diminishing of the Board capacity to negotiate in good faith with creditors and the erosion of the Congress trust in the Board”, said Bishop in a letter referred to the Board president, José Carrión. The Congress member led the discussion and approval of federal law PROMESA, estatute approved a year ago which authorized Puerto Rico to renegotiate its public debt. That, in exchange of imposing on the Island the federal fiscal regent that BIshop helped to create at the request of the Island creditors, with the endorsement of the United States Treasury and the acceptance of the local government.
According to Bishop the RSA must follow its own course, for it has been adopted before PROMESA enforcement.
Last night, Carrión acknowledged receipt of the letter from Bishop
“I have received the letter from president Bishop and I thank him for his leadership and his continuous interest on the PROMESA agenda for Puerto Rico. We understand his concerns and position and we will answer promptly”, noted Carrión in a written statement.
Bishop letter confirms El Nuevo Día reports about the pressure received by the Board to approve the RSA of the PREPA.
The RSA of the PREPA was agreed initially by the end of 2015 and, since then, the Ad Hoc-PREPA group - which includes banks, municipal insurance companies and bondholders - has extended the dates of the agreement in 16 occasions.
The agreement is the only one of a volunteer kind that has been reached and, according to the fiscal plan of the PREPA, this must be presented under Title VI of PROMESA by next July 1st.
The delay in the process of analysis of the RSA and the Fiscal plan of the PREPA involves a complication for the Government. The bondholders of the PREPA are, actually, the only ones that have not presented before the Court. Last year the municipal insurance companies lent moneyso the PREPA could pay their bondholders, an agreement that they would be ready to repeat under the new terms of the RSA.
Starting next July, the debt service of the PREPA will be close to $762 million and of that figure it is estimated that about $453 million must be paid next month.
Delayed fiscal plan
On the other hand, the delay on the RSA analysis does not only answers to the struggle to concrete such agreement.
This week, the Fiscal Agency & Financial Advisory Authority (FAFAA) confirmed to El Nuevo Día that it has not presented the changes on the fiscal plan of the PREPA asked by the Board last April 28th.
“The FAFAA and the PREPA keep on working with the Board and their advisors to finish the modifications that the PREPA fiscal plan required”, indicated the FAFAA in written statements.
The tab of the lock
Last April, the Board approved the fiscal plan of the PREPA, but established several conditions. Among the ones imposed, the Board asked the PREPA that the average cost of a kilowatt-hour (kvh) in Puerto Rico does not exceed the 21 cents kvh by 2023.
Según fuentes de El Nuevo Día el requisito de 21 centavos kvh haría invíable el RSA.
According to sources, the 21 cent kvh requirement would make the RSA impossible.
“The objective rate established by the Board is a factor in the work process of the fiscal plan”, stated the FAFAA.
💬See 0 comments