Renewable energy deal discussions centered on projects in Puerto Rico have been difficult – particularly for project owners – over the past few years. The foundations of most of the projects on the island were power purchase agreements (PPAs) with PREPA, the utility which, as an organ of the government was capable of issuing its own bonds and faced the same credit issues as the island itself. Therefore most projects have teetered along on life support for some time as financiers were unwilling to even open discussions with such a poor credit offtaker in the mix. However, interest in the island seems to have been heating up lately.
Proposals for behind-the-meter projects with private offtakers and wheeling scenarios have been popping up. Even old PREPA deals, many of which had died slow deaths in the wake of missed debt payments, may be in the process of resurrection. Why? Some may have missed it during the dog days of summer, but the main reason is the passage of PROMESA – the Puerto Rico Oversight, Management and Economic Stability Act. Among other things, the legislation: 1) created a fiscal control board; 2) granted the control board the power to force a debt restructuring; and, 3) allowed for the minimum wage to be lowered.
The Democrats on the Obama-appointed board are: Arthur Gonzalez, a senior fellow at New York University’s School of Law; Jose Ramon Gonzalez, president and chief executive officer of the Federal Home Loan Bank of New York; and Anna Matosantos, a financial and budget consultant at the Public Policy Institute of California. The Republicans are: Carlos Garcia, founder and chief executive officer of Bay Boston, a minority owned private equity firm; Andrew Biggs, a resident scholar at the American Enterprise Institute; and David Skeel, a University of Pennsylvania law professor; and Jose Carrion III.
While many – including some lawmakers who voted on the bill – have criticized PROMESA, and while it does not directly address solar deals on the island, it has seemingly given the island – and the solar industry along with it – a lifeline. If it hasn’t already, don’t be surprised if Puerto Rico shows back up on your radar very soon . . . .