Disputes with PREPA energy provider could turn into debt problems: analyst
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Major disputes between Puerto Rico’s local government and the provider of energy to the Puerto Rico Electric Power Authority, if they persist, may create problems for PREPA’s bankruptcy, an analyst said.
The problems with New Fortress Energy may be “a harbinger of problems to come,” said Puerto Rico attorney John Mudd.
Issues that could impact PREPA, Mudd said, include New Fortress filing for Chapter 11 bankruptcy, Puerto Rico canceling its dock contract with New Fortress, or rejection of post-petition executory contracts with New Fortress in the final plan of adjustment.
“The recent disputes with New Fortress emphasize the risks to Puerto Rico from being so heavily dependent on this financially struggling gas supply company,” said Cathy Kunkel, an energy consultant with Institute for Energy Economics and Financial Analysis. “In addition to its role as a fuel supplier, New Fortress has the contract to operate most of the island’s power plants, owns the only LNG import terminal on the north coast and controls crucial infrastructure at the port of San Juan.”
In a letter to Puerto Rico’s government Friday, New Fortress said it was ceasing delivery of natural gas to Puerto Rico’s power plants due to the local government’s alleged failure to pay $9 million due in 2020 plus $3 million in interest.
Puerto Rico Gov. Jenniffer González Colón boasted Tuesday that her firmness with New Fortress pushed it to restore supplying natural gas to Puerto Rico power plants.
“We will not accept blackmail or pressure from any contractor, we will demand accountability and compliance with contracts,” González Colón said on the X social media site.
Puerto Rico Energy Czar Josue Colon Ortiz on Saturday said Puerto Rico owed the firm none of the money New Fortress claimed, and PREPA had explained why in letters in October 2020. PREPA has paid New Fortress $1.5 billion for goods and services over the years.
Colon Ortiz said New Fortress’ behavior breached a 2019 agreement and disregards public welfare.
New Fortress didn’t respond to a Bond Buyer request for comment.
New Fortress is the parent company of Genera PR, which runs Puerto Rico’s electricity plants.
The Puerto Rico Oversight Board earlier this month declined to approve a contract for New Fortress to supply gas to Genera for 15 years, citing various concerns.
Fitch Ratings
The Puerto Rico Public Private Partnership Authority announced in late May that it had a short list of firms that may provide emergency generation capacity, which didn’t include New Fortress Energy.
New Fortress Energy filed a formal protest over not being selected.
González Colón has talked in recent months of canceling Puerto Rico’s contracts with Genera PR and the distributor and transmitter of electricity, LUMA.
PREPA’s
