Puerto Rican lawmakers have passed the PREPA Revitalization Act which aims to rescue the country's main power utility by restructuring nearly $9 billion of debt. The passage of the bill is perceived as a crucial step to ease the debt-laden country's financial woes.
The legislation was signed into law by Governor Alejandro Garcia Padilla on Tuesday after winning the approval of the Senate and House of Representatives, BBC reported Wednesday. The law underscores a debt-reduction agreement between the Puerto Rico Electric Power Authority and its creditors, in which bondholders would accept a 15 percent loss on repayments. A slower payment schedule for the debt would be imposed together with lower interest rates.
According to the New York Times, PREPA and its creditors finalized their debt exchange agreement in December, but legislators delayed its approval in January due to doubts and protests from union groups.
Savings on principal and interest payments that would accrue in favor of PREPA would be allocated to rehabilitating its facilities to enable it to produce more natural gas. Previously, PREPA was reliant on crude oil to produce energy for the island, and the shift to natural gas would provide Puerto Rico with clean energy.
"This legislation provides Prepa with critical tools to make PREPA the modern utility that Puerto Rico needs and deserves," PREPA executive director Javier Quintana Mendez said, as quoted by Bloomberg. "We look forward to further legislative action that will allow Prepa to continue to provide the people of Puerto Rico with safe, reliable and clean electricity."
Puerto Rico is sitting on a total debt load of $70 billion. Without the much needed restructuring on PREPA's framework, the utility would still be unable to pay its debt which is due on July 1.
As the country struggles to provide solutions to the fiscal crisis, the Puerto Rican government issued unaudited financial statements which "could be useful in evaluating Puerto Rico's financial condition and new legislative measures to address the current fiscal crisis." The 2014 unaudited financial statements shows a net deficit amounting to $49.2 billion.
The United States has been very critical about Puerto Rico's lack of verified information on its finances. The government, however, has assured that audited financial statements for 2014 will be ready by March.
