After two and a half years of negotiations, the Puerto Rico Aqueduct and Sewer Authority (PRASA) reached certain agreements with the federal government to restructure almost $1 billion debt, announced yesterday PRASA executive director, Elí Díaz Atienza.
Specifically, the restructured debt is divided into $570 million from the U.S Environmental Protection Agency's (EPA) state revolving funds for drinking and clean water and $403 million from the U.S. Department of Agriculture (USDA) Rural Development program. The agreements change the economic terms of both obligations.
"Most of the funds for our capital improvement program or infrastructure paused since 2015, comes from these lines. Therefore, this debt restructuring agreement with federal agencies represents an important step with multiple benefits for the Authority," Díaz Atienza said.
In an interview with El Nuevo Día, the official emphasized that the agreements mean a reduction or saving of $380 million in debt service over a period of 10 years.
He even pointed out that savings could reach $ 500 million, since the revolving and rural development funds, which are granted as very low-interest loans, are paused since 2017 and, therefore, PRASA has not made the payments.
"Through EPA revolving funds, we will pay 0 percent interest for the next 10 years and 1 percent interest for the next 20 years. With Rural Development, the interest rate will be reduced from 4 to 2 percent for the loans lifetime," he explained.
"These are long-term loans. They were all individual and we consolidated them to unify all of them. The longest EPA loan had 29 years left and the Rural Development one had 36. Now, EPA loans are for 30 years and Rural Development ones for 40," he said.
Díaz Atienza stressed that the agreements do not impact the tariffs of 1.3 million PRASA customers.
On the other hand, he said that the transaction allows PRASA to have access to these federal funds again, which would reach $440 million in the next five years.
“That is money that will go directly to infrastructure. Loans at such low interest are the most beneficial. It is the cheapest money on the market to invest in infrastructure. This is tied to the agreement with EPA to make the repairs and help us with FEMA (Federal Emergency Management Agency) to move reconstruction funds ( after Hurricane María),” he said.
The agreements were endorsed by the Oversight Board. "The Board appreciates the U.S. government´s willingness to agree on these terms, which will support PRASA’s ongoing efforts to safeguard Puerto Rico´s public health and water infrastructure," said the Board’s Executive Director Natalie Jaresko, in a press release.
According to Díaz Atienza, another benefit of the agreements is the elimination of the central government’s guarantee on the almost $1 billion debt which now falls only on PRASA. Meanwhile, for the federal government, the "greatest benefit" is that the debt was given the same rank in payment obligation as to "senior" bondholders.
In addition to PRASA, the Fiscal Agency and Financial Advisory Authority (FAFAA) management and technical team participated in the negotiations. In a press release, FAFAA Executive Director Omar Marrero stated that the agreements put PRASA on the road to “credit rehabilitation”, which will allow it to access the capital bond markets again.
"We trust that this step will allow the implementation of a project of remote meter reading through a public-private partnership in PRASA, but it will also serve as an example to keep reaching consensual agreements for debt restructuring in our public corporations, achieving real and tangible benefits for the people," Marrero said.
Other agencies participating in the transaction were the Infrastructure Financing Authority, the Department of Natural and Environmental Resources, the Department of Health, the Governor’s Office and Resident Commissioner in Washington D.C., Jenniffer González.