IEEFA Study Finds Puerto Rico Power Company's Debt Restructuring Inadequate; Sees Missed Opportunities in Wind, Solar And Energy Efficiency

SAN JUAN, Puerto Rico, Sept. 10, 2015 /PRNewswire-USNewswire/ -- The Institute for Energy Economics and Financial Analysis released a report today concluding that the Puerto Rico Electric Power Authority (PREPA) is being overly generous with bondholders in its proposal to restructure its debt and short-sighted in its wind, solar and energy efficiency plans for the U.S. territory.

The report ("Opportunity for a New Direction for Puerto Rico's Electricity System")—endorsed by Puerto Rican leaders and activists including Archbishop Roberto O. González Nieves—comes as the island's government proposes hasty restructuring deals with some of its creditors. It is the first independent study of the issue.

Tom Sanzillo, IEEFA's director of finance and a former deputy comptroller for New York State, said the government proposal announced Wednesday could serve as a jumping-off point in how Puerto Rico recovers from it debt crisis and manages its energy future but that it fails to serve the larger public interest. "PREPA is at a transitional moment in its finances, and it is in danger of missing the moment," Sanzillo said. "It is in a transitional moment in its energy-planning process, too, and is danger of missing that moment as well."

The report makes six recommendations for managing PREPA's financial crisis:

• That creditors take more substantial principal reductions than they have agreed to thus far.   
• That bond insurers begin paying claims against PREPA bonds as soon as possible.
• That debt for PREPA be tied to fundamental public finance principals, that is, that assets produce revenues that cover costs. 
• That federal participation in PREPA's financial reorganization be limited to the provision of loans once the agency has developed sound fiscal practices.
• That short-term oil price savings be used for longer-term ratepayer and fiscal benefits.
• That all stakeholders recognize their common bind and that losses and responsibility must be shared on an equitable basis. 

It includes three energy-policy recommendations:

• That Puerto Rico pursue a clean-energy transformation from its current over-reliance on expensive and outdated oil-fired power plants.
• That the territory avoid becoming overly reliant on natural gas.
• That PREPA adopt an integrated resource plan that includes a scenario prioritizing investment in wind, solar and energy efficiency.

Cathy Kunkel, a research fellow at IEEFA and an author of the report, said PREPA in its current "preferred plan" for energy development ignores advances and long-term trends in global energy markets. "PREPA is proposing to invest more than $3 billion over the next decade in its transition to natural gas. Pursuing this investment strategy will lock PREPA into a future dependence on natural gas and crowd out potential investments in wind, solar and energy efficiency," Kunkel said.

Monsignor Roberto O. González Nieves, the archbishop of San Juan, said the report comes at an important time in Puerto Rico's history. "Any analysis of Puerto Rico's energy situation that relies largely on solar and wind rather than fossil fuels must be taken very seriously by our island's leaders," Gonzalez Nieves said. "As an island, Puerto Rico is especially at risk due to climate change.  We have both a practical and a moral duty to play a leadership role in protecting God's creation. We must do our best to lead by example."

Leaders of El Puente Latino Climate Action Network, which commissioned the IEEFA report, endorsed its findings. "Amidst all of the attention that has been placed on the debt crisis of Puerto Rico, this is the first report that focuses on solutions that could result in lower electric rates, cleaner energy consumption, greater employment, and a stronger economy for the entire island," said Luis Garden Acosta, president, El Puente Latino Climate Action Network.

David Ortiz, director for El Puente Latino Climate Action Network said, "Puerto Rico, blessed with abundant sunshine and wind, today has a rare opportunity to lead the way toward a clean energy future. We also have a responsibility to help show the larger world the way forward. This report helps illuminate the path."

José Calderon, president of the Hispanic Federation, said the IEEFA report offers much-needed perspective.

"This provides an ambitious but practical plan for how the island's electric system can shift from dirty to clean energy while also promoting sorely-needed economic development," Calderon said. "PREPA's debt burden can and must be greatly reduced.  We call on Puerto Rico's decision makers to read this report very carefully and take its recommendations very seriously."

BACKGROUND

El Puente's Latino Climate Action Network asked the Rockefeller Family Fund (RFF) for help in analyzing the Puerto Rican electric system, run by the Puerto Rico Electric Power Agency (PREPA), and to recommend tangible and practical reforms to the system.  RFF, in turn, recruited the Institute for Energy Economics and Financial Analysis to perform that analysis and make those recommendations.  The report prepared by IEEFA recommends increasing the use of electricity generated by solar and wind, increasing energy efficiency measures, bringing down the cost.   

ABOUT THE GROUPS

The Institute for Energy Economics and Financial Analysis (IEEFA) http://ieefa.org/ conducts research and analyses on financial and economic issues related to energy and the environment. The Institute's mission is to accelerate the transition to a diverse, sustainable and profitable energy economy and to reduce dependence on coal and other non-renewable energy resources.

EDITOR'S NOTE:  IEEFA and El Puente Latino Climate Action Network hosted a phone-based news conference with full Q&A at 11 a.m. EDT on Thursday, September 10, 2015 to discuss findings of the report, "A New Direction for Puerto Rico's Electric System."  The report is available in both English and Spanish at www.ieefa.org.

A streaming audio replay of this news event will be available as of 4 p.m. EDT on September 10, 2015 at http://ieefa.org/category/press-releases/.

SOURCE The Institute for Energy Economics and Financial Analysis (IEEFA), New York City

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