NEW YORK (Reuters) - Bondholders of Puerto Rico’s bankrupt power utility, PREPA, said on Friday that the damage to the local electric grid by Hurricane Maria is not as bad as the island’s government says, and could be fixed quickly with an outside energy expert in charge.
The PREPA bondholders made the argument in a written filing in federal court in San Juan. The utility filed for a form of bankruptcy in June to shed $9 billion of debt, while Puerto Rico’s government filed for bankruptcy in May. It has $72 billion of total debt.
The bondholders want to persuade the judge overseeing the island’s bankruptcy to pick an energy industry expert to run PREPA, from a list of names on which creditors may or may not have input.
Citing their own assessment of grid damage, led by energy consultant Derek HasBrouck, the bondholders said some 95 percent of transmission assets are fully functional, and observed only “a few broken poles” among 75 distribution substations that were visually inspected.
Those numbers contrast starkly with the Puerto Rican government’s assessment that 80 percent of the electric grid was destroyed when Maria made landfall on September 20, the most powerful storm to hit Puerto Rico in decades.
Maria knocked out power to the entire island, and six weeks later only about 30 percent of electricity has been restored.
The PREPA bondholders, who include mutual funds like Oppenheimer and Franklin Advisers, say HasBrouck’s findings prove Governor Ricardo Rossello’s administration has botched the response to Maria and that PREPA needs an outside manager.
“It is imperative to retain an experienced, seasoned electric utility executive to run PREPA,” the bondholders said.
In an interview with Reuters on Thursday, though, Puerto Rico Governor Ricardo Rossello dismissed the idea that damage has been overstated.
“To be clear and blunt, the devastation was severe,” Rossello said. “There is no way to minimize how significant that devastation was.”
Whoever Puerto Rico’s bankruptcy judge appoints to step in at PREPA, the bondholders argued, it should not be Noel Zamot.
The retired U.S. Air Force colonel was tapped for the role by a federal board that has a mandate to manage Puerto Rico’s finances. Zamot has worked with the board already on separate issues.
His appointment must be confirmed by the judge. But Zamot, the bondholders argued, has no experience running a power utility.
Their opposition hints at a broader power struggle over control of Puerto Rico’s financial turnaround between the board and investors bracing for big debt cuts.
The squabble marks a return to a focus on Puerto Rico’s debt, after creditors stayed largely quiet for weeks following Maria, which killed at least 50 people on the island.
Reporting by Nick Brown; editing by Daniel Bases and Rosalba O'Brien