U.S. District Judge Laura Taylor Swain has denied a petition from certain bondholders to reopen the Puerto Rico Electric Power Authority’s (PREPA) confirmation hearing record to allow new evidence showing the utility can afford to pay more to creditors as part of the debt adjustment plan.  

Assured Guaranty Corporation; the U.S. Bank National Association, in its capacity as PREPA Bond Trustee; the PREPA Ad Hoc Group; GoldenTree Asset Management LP; and Syncora Guarantee Inc. had asked the court to reopen the record of the confirmation hearing after LUMA Energy, the private operator of PREPA’s transmission and distribution system, issued new information showing the utility could afford to pay more of its debt.

“Not long after the hearing concluded, LUMA issued updated projections of PREPA’s electricity demand that further demonstrate that PREPA can afford to pay substantially more to creditors,” they said. “Yet when the PREPA Bondholders asked the [Financial Oversight and Management Board] to adjust the plan to account for this critical new information, the Oversight Board not only refused to do so, but it would not even consent to the PREPA Bondholders’ request to supplement the hearing record to reflect the updated projections.”

In a three-page ruling last week, Swain, who is overseeing the electrical utility’s Title III bankruptcy process, said the PREPA bondholders have already asserted and submitted evidence in support of their argument that the Base Case load forecast in the 2023 Fiscal Plan is unreasonable and understated because the preliminary load forecasts LUMA submitted to the Puerto Rico Energy Bureau as part of the integrated resource plan (IRP) process project a higher load, but she said it was not sufficient to reopen the record.

“The Court is not persuaded that it is appropriate or necessary to reopen the fully submitted record to add evidence in furtherance of the PREPA Bondholders’ explored argument that the  Oversight Board’s reliance on a load forecast consistent with Commonwealth law and the 2023 Fiscal Plan should be rejected in favor of preliminary load projections by LUMA that are allegedly more optimistic,” she said.

“The current record is sufficient to permit the court to address properly the parties’ positions,” the judge added. “For these reasons, and for substantially the reasons set forth in the Oversight Board’s Response and AAFAF’s [the Puerto Rico Fiscal Agency and Financial Advisory Authority] Response, the Motion is denied.”

The oversight board had noted that the objecting bondholders had failed to acknowledge, however, that LUMA’s resource planning forecast is a draft, and calculated in a way materially different from the fiscal plan net load projection.

“Indeed, the preliminary LUMA resource planning forecast is a draft meant to predict the amount of electricity generation PREPA may need to plan for future generation and resource needs, a number PREPA understandably cannot risk underestimating,” the oversight board had argued. “The Fiscal Plan load, on the other hand, is a projection of the amount of electricity that may be sold to and paid for by customers in future years based on customer data, inflation, and other factors.”

Source: The San Juan Daily Star