The Fiscal Oversight Board requested the Puerto Rico Electric Power Authority (PREPA) to provide information regarding apparent noncompliance with the terms established in the fuel supply agreements it has with New Fortress Energy (NFE), a company to which the public utility claims a debt of $34.5 million.
According to the letter the Oversight Board sent on January 18, the information previously provided by the public utility does not include “nominations for natural gas made by PREPA during contract year 2021 pursuant to the Fuel Sale and Purchase Agreement (the “FSPA”) between PREPA and New Fortress Energy”. In the letter, signed by the entity´s new Executive Director Robert Mujica, the Board asked PREPA to inform if, in fact, it requested the fuel from the company, and to provide the relevant supporting documentation.
The Board also asked PREPA to confirm if the public utility “submitted calendar year 2021 Annual Delivery Programme (”ADP”) and Annual Contract Quantity (“ACQ”), as provided for in Section 7.4(a) of the FSPA, including the date on which such notices were delivered. According to the fiscal entity, based on a review of the information provided by the public utility, “it appears that the ADP and ACQ for calendar year 2022 were delivered by PREPA on February 4, 2022, 248 days after the deadline established in the FSPA”. The letter also required PREPA to “explain whether delivery of the ADP and ACQ after the established deadline has any consequences on PREPA and/or the supplier’s obligations under the FSPA”.
NFE supplies the natural gas that PREPA uses for units 5 and 6 of the San Juan power plant, and is also part of Genera PR, which, according to sources, was the company selected, in the bidding process, to operate the island’s generation system. The privatization contract has already been approved by the Boards of directors of the Public-Private Partnerships Authority (P3A) and PREPA. Now, it is waiting for Governor Pedro Pierluisi to sign it.
Over the last year, NFE has also been involved in a controversy with PREPA for its alleged failure to comply with its obligations to deliver natural gas.
According to what PREPA stated before the Energy Bureau, due to the insufficiency of natural gas, the public utility has been forced to burn more expensive fuels, resulting in an additional cost of $34.5 million. Because of this situation, PREPA recently asked the Bureau not to recover this difference from customers until negotiations with NFE on the amount in controversy conclude.
However, in a letter sent to PREPA’s Executive Director Josué Colón on January 17, NFE stated that the parties had reached an agreement whereby “NFE helped PREPA resolve some financial and potentially operational concerns given PREPA’s failure to submit liquefied natural gas orders under the FSPA (Fuel Sales and Purchase Agreement).” In that letter, NFE argued that the company has “no record” that PREPA had sent “nominations” for natural gas for the years 2021 and 2022.
Last week, El Nuevo Día requested an interview with Colón to address the contractual controversy with NFE, but PREPA’s executive director was not available.
The Board´s January 18 letter is a follow-up to another letter sent on November 28, 2022, in which the entity questioned PREPA about amendments to its contract with Novum, another natural gas supplier. According to the Board, PREPA did not submit an amendment through which the supplier receives an additional $3 for each barrel of fuel.
In an interview in December 2022, Colón expressed surprise at the Board’s question, saying that the entity had been “part of this whole process,” referring to the contract amendments.