SAN JUAN, Puerto Rico — A new private company will take over the power generation units owned by the Puerto Rico Electric Power Authority, the public corporation currently in charge of generating power on US soil.
Genera PR, an independently managed subsidiary of New York-based energy company New Fortress Inc., has been awarded a 10-year, multi-million dollar contract contract operate, maintain and dismantle power generation units on the island.
Plagued by repeated blackouts and deteriorating infrastructure, power generation equipment in Puerto Rico is on average around 45 years old, twice the age of that found in the continental US. that some of them are six decades old. They mainly depend on fossil fuels.
The company and the Puerto Rico Electric Power Authority (PREPA) are currently in a transition process that will last 100 days. Genera PR is expected to formally start operations in July.
Puerto Rican officials have been taking steps to privatize power generation for some time. The Genera PR contract went through various stages of approval and the final one was announced on Wednesday in a long press conference.
Under the terms of the new partnership, the Puerto Rican government has agreed to cover up to $15 million in transition costs to Genera PR, authorities said. In addition, the company will be paid an annual fee of $22.5 million for the first five years. The fee will decrease after the fifth year, to a minimum of $5 million per year. The exact amount will be determined by the number of power plants removed during the forfeiture process.
«We continue to make progress in the transformation that we all want,» Governor Pedro Pierluisi said in a statement. «I am confident that we are on the right path to provide our people with the reliable and affordable power system they deserve.»
Genera PR can also receive up to $100 million in incentives if it achieves savings in operating costs and complies with occupational safety, environmental and fuel purchase guidelines, Fermín Fontanés Gómez, executive director of the Public-Public Alliances Authority, said during the news. Private of Puerto Rico. conference.
Fontanés Gómez emphasized that PREPA will continue to own the power generation units, since Genera PR was only contracted to operate, maintain and eventually seize the units.
Genera PR was one of two companies that submitted proposals to PREPA, the agency in charge of managing the contract, during a two-year bidding process.
The officials said that of the two interested companies, Genera PR was willing to provide services at a lower cost, compared to its competitor. Genera PR’s priorities also align with local policies, they said, including Law 17-2019which sets several benchmarks for Puerto Rico to reach 100% renewable electricity by 2050.
Less than 4% of Puerto Rico’s power generation currently comes from renewable energy.
As Puerto Rico seeks to transition to renewable energy, «this partnership will provide significant cost savings for consumers and businesses, improve reliability, and reduce the environmental impact of an aging thermal generation system,» said the president and CEO of New Fortress, Wes Edens, in a declaration.
Skepticism amid frustration
A crowd gathered Wednesday in front of Governor Pierluisi’s mansion. to protest privatization and the new contract.
PR CHANGEa non-profit organization that advocates for greater energy sustainability, said on Twitter that the hiring of Genera PR «confirms another expensive transaction full of conflicts of interest and a contractor that has broken contracts and laws.»
New Fortress Inc., Genera PR’s parent company, has previously sold fuel to PREPA.
NF Energia LLC, a natural gas supply company and subsidiary of New Fortress Energy Inc., received a acquisition contract in 2019 to sell natural gas to PREPA to power two generation units in San Juan. The $1.5 billion contract is valid until March 2024, according to data from the Office of the Comptroller in Puerto Rico.
PREPA has alleged that the natural gas company has breached its obligations to deliver the natural gas as agreed. The lack of natural gas has forced the electric authority to burn more expensive fuels, which has resulted in an additional cost of $34.5 million, reported Puerto Rico’s largest newspaper, El Nuevo Día reported.
The details of the new contract were explained during the press conference on Wednesday morning, and the official document it was made public at night.
The Genera PR contract is the result of a privatization process that began in 2017, after PREPA filed for bankruptcy following years of low liquidity, limited access to capital markets and long-term debt burden.
That same year, Puerto Rico was hit by Hurricane Maria, one of the largest and deadliest natural disasters to hit US soil in 100 years, further deteriorating the already fragile and underinvested power grid.
As part of an ongoing privatization process, in 2021 PREPA ceded the island’s power transmission and distribution system to Luma Energy. The consortium made up of Atco in Canada and Quanta Services Inc. in Texas began operating on the island in June 2021.
At the time, government officials promised that the partial privatization of the power grid under Luma would improve power services, but the territory’s residents are still dealing with frequent outages.
After Hurricane Fiona struck Puerto Rico in September, the grid was unable to withstand the Category 1 storm, causing an island-wide blackout that took more than two weeks to undo.
Energy customers in Puerto Rico have seen seven increases in electricity rates in the past year, despite the fact that people in Puerto Rico already pay roughly twice as much as customers in the continental United States for unreliable service.
Luma Energy says it has reduced the frequency of outages by 30% over the past year and has started 251 federally funded projects to permanently rebuild the network repaired after Hurricanes Maria and Fiona.
PREPA’s bankruptcy continues as the public corporation attempts to restructure its nearly $9 billion public debt, the largest of any government agency.