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Puerto Rico’s Governor Ricardo Rosselló will be a no-show at a Congressional hearing Wednesday afternoon on efforts to wrench control of the bankrupt Puerto Rico Electric Power Authority from the island’s government.
The House Natural Resources Committee invited Rosselló to testify at the hearing titled “Management Crisis at the Puerto Rico Electric Power Authority and Implications for Recovery” via a letter from committee chairman Rep. Rob Bishop, a Republican from Utah.
Bishop wrote, “Despite your recognition of the politicization that has plagued PREPA and your commitment towards allowing for independence, the recent departure of PREPA’s CEO after only four months of service and the resignation of the majority of PREPA’s governing board are the most recent signs of the utility’s continued dysfunction and a sign that ‘political forces…continue to control PREPA.’”
Rosselló announced his decision to skip the hearing at a Tuesday night press conference.
The committee held a briefing with reporters on Tuesday night where a committee staffer reiterated to reporters that privatization was the end goal and a federal takeover of the agency was not “in the cards.”
The committee will have an update on an investigation of corruption at PREPA.
In addition to Bruce Walker, an assistant secretary at the federal Department of Energy, the other three invited witnesses — Thomas Emmons, a partner at private equity firm Pegasus Capital Advisors, James Spiotto of Chapman Strategic Advisors LLC, and David Svanda, a consultant — have an interest in what happens to the PREPA debt.
Cate Long, founder of Puerto Rico Clearinghouse, a research firm focused on the crisis on behalf of bond investors, told MarketWatch, “A move to take control of the electric utility away from the PR government is long overdue.”
David Crane, the senior operating executive at private equity firm Pegasus Capital Advisors, which will have an executive testifying at the hearing, made the investor case clear: “PREPA, and its debts, need to be set aside and replaced by a privately capitalized power company charged with creating an alternative type of power system for Puerto Rico,” he wrote in October 2017 in GreenBiz, the publication of a membership-based, peer-to-peer learning forum for sustainability executives.
Rosselló is miffed at the committee over a July 19 tweet from the committee’s Twitter account with the posting the invitation with the tagline, “Call your office, @RicardoRossello.” The committee deleted the tweet but the governor said he still has not received an apology.
PREPA’s auditors, Ernst & Young, stated in the most recent audited financial statement from 2015 that there is substantial doubt that it can continue as a going concern, since it does not have sufficient funds to fully repay its obligations as they come due and is restructuring its long-term debt.
The electric utility filed for bankruptcy in July 2017 burdened with $9 billion in debt, utilizing Title III of the 2016 Puerto Rico rescue law known as PROMESA, which gave Puerto Rico and its agencies access to a debt restructuring process similar to U.S. bankruptcy.
The debt of independent agencies in Puerto Rico like PREPA was intended to be repaid by revenues from the utility, revenues that were severely impaired after the devastation to the island in September 2017 from hurricanes Irma and Maria.