According to a recent news report, the Puerto Rico Electric Power Authority (known as Prepa), which has been in bankruptcy proceedings since 2017, is now seeking help from the Puerto Rican government—specifically, the use of commonwealth funds—to repay its creditors. Prepa, which is subject to financial oversight from the Financial Oversight and Management Board (FOMB) of Puerto Rico, claims that it has no money available to repay its creditors due to the expense of operating while addressing crumbling infrastructure.
Indeed, Prepa, which provides electricity for the entire island of Puerto Rico, is in terrible shape. Its residents pay high rates for unreliable service. Prepa has estimated that it will need approximately $40 billion to improve its infrastructure to the point where it can provide at least somewhat reliable service.
Prepa’s financial and operational challenges have been long-running. As Prepa and the FOMB continue to explore options for repaying its debt, it will be crucial not to further penalize residents of Puerto Rico and to recognize the essential nature of the services Prepa provides. Although Prepa has been in bankruptcy proceedings for seven years and counting, the report notes that the FOMB’s most recent fiscal plan is the first to include input from private operators that have been on the ground managing the electric grid. Hopefully, this plan will allow restructuring efforts to gain traction among stakeholders, enabling Prepa to exit bankruptcy proceedings and regain some measure of stability and service. However, whether the end is truly in sight is still anybody’s guess.