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Governor Pedro Pierluisi.
Governor Pedro Pierluisi. (Xavier Araújo)

After a bidding process that began in August 2020, the government officially announced yesterday that Genera PR —through a public-private partnership (P3)— will be in charge of operating, maintaining, and eventually decommissioning the power generation of the Puerto Rico Electric Power Authority (PREPA), which will continue to be the owner of the “legacy assets,” as they will be called from now on.

Genera PR, a local subsidiary of the multinational New Fortress Energy -a company already related to PREPA- has been awarded a 10-year contract, a term that is consistent with the Integrated Resource Plan (PIR) regarding the useful life of the plants, “which are old, inefficient, use fossil fuels and pollute our environment,” as described by Governor Pedro Pierluisi. The PIR is the document that guarantees the orderly development of the power grid and prioritizes renewable energy sources. “The Public-Private Alliance we are announcing today is another great step towards the energy transformation that our people need and deserve,” Pierluisi said at a press conference.

“What we are doing here is following the law, and that is above all else,” he insisted.

The governor highlighted the Electric Power System Transformation Act ( Act 120-2018), which authorizes the sale of PREPA’s assets, and the Energy Public Policy Act (Act 17-2019), which created the generation portfolio with renewable sources until it reaches 100 percent by 2050.

“Our objectives with this contract are to continue advancing the transformation of our power system, advancing the transition to renewable energy generation according to the Integrated Resource Plan approved by the Puerto Rico Energy Bureau (NEPR, Spanish acronym), and also to provide effective long-term planning of our energy needs and to maximize the operation of the plants to guarantee the stability of our electricity system while transforming it into a renewed, modern and efficient one that promotes economic development,” added the governor, after saying that Genera PR “will maximize the operation of the plants.”

The company will operate and maintain 12 plants, including Costa Sur, in Guayanilla; Aguirre in Salinas; Palo Seco in Cataño; San Juan in the capital; and Cambalache in Arecibo, as well as peaking units spread throughout the island.

PREPA, on the other hand, will be responsible for the operation and maintenance of the more than 10 dams it has, as well as the irrigation canals and hydroelectric plants.

Financial aspects

Fermín Fontanés, Executive Director of the Public-Private Partnership Authority (P3A), referred to what he called the “key terms” of the contract and said that Genera PR will receive a fixed annual payment of $22.5 million during the first five years. After this period, the payment will be reduced to a minimum of $5 million per year, depending on the decommissioning of the plants.

Fontanés added that the company will be able to receive up to a maximum of $100 million per year in incentives, subject to compliance with several aspects such as occupational safety, environment and fuel purchases which he described as “extremely important” since it is Genera PR´s parent company New Fortress Energy´s area of expertise. For example, the contract establishes that Genera PR must submit a fuel management plan to the NEPR.

Moreover, the NEPR will be the regulatory body in charge of ensuring compliance with the metrics imposed, which have not yet been fully defined. Meanwhile, the P3A, as administrator of the contract, will be in charge of ensuring compliance with the established clauses, as is currently the case with LUMA Energy, the consortium in charge of the operation and maintenance of the transmission and distribution system through another P3.

Pierluisi added that La Fortaleza will also oversee, after the creation - in August - of the Auxiliary Secretariat of the Governor’s Office for Energy Affairs. “In addition, we have the Legislative Assembly, which has every right to oversee this issue, and also the mayors,” he said.

Meanwhile, Fontanés added that any savings achieved by Genera PR will be shared with PREPA on a 50%-50% basis, and the money the public utility receives will be used to reduce the electricity bill. He estimated that the most significant savings will come from the purchase of fuel, which totals $3 billion annually.

Regarding the transition period between PREPA and Genera PR, he specified that it will last 100 days, and the company will receive a maximum payment of $15 million to cover related expenses. If expenses exceed $15 million, Genera PR will cover them. The government’s expectation, Fontanés said, is that the company will be fully operational and collect the $22.5 million on July 1, the start of the next fiscal year.

Genera PR staff is expected to visit the 12 facilities it will operate and begin talks with PREPA employees, who, according to Pierluisi and Fontanés, will have “priority” in the hiring process.

Job security

Another clause in the contract requires the company to offer full-time employment to the workers at the plants, who will have the final say on whether or not to accept the offers which should start within 30 to 45 days, Fontanés told El Nuevo Día.

PREPA employees who decide to go to Genera PR will be offered a two-year employment guarantee. On the other hand, those who choose not to join the company will be transferred to another government agency under the single employer law.

The Secretary of State and Executive Director of the Fiscal Agency & Financial Advisory (FAFAA), Omar Marrero, said that “for those employees who are close to retirement, we want to give them an option so they can go to the private sector. It would be a kind of incentive and would have to be approved by the Oversight Board, which yesterday approved the Genera PR contract.”

On the other hand, Fontanés pointed out that in response to the points requested by the Legislative Assembly, the contract establishes that Genera PR will make “commercially reasonable efforts” to ensure that local companies are included in the bidding processes for the purchase of materials and services and that it will do the same to select subcontractors. The money to pay for this will come from PREPA’s $300 million operating budget.

When asked about guarantees to avoid conflicts of interest, given that New Fortress Energy already has a natural gas supply contract with PREPA for units 5 and 6 of the San Juan plant, he explained that if the parent company wants to compete for new fuel contracts, a third party will be in charge of evaluating its request. This third party will respond to the P3A, has not yet been selected, and will be the same one that will address conflict of interest situations between LUMA and its parent companies (ATCO and Quanta).

Pierluisi added that the P3A Alliance Committee that selected Genera PR, considered the issue “and understood that it was not an impediment” to PREPA’s claim before the NEPR for some $35 million that New Fortress Energy allegedly owes it. The Alliance Committee ruled the same way on the Federal Energy Regulatory Commission’s (FERC) regarding the fact that New Fortress Energy built its natural gas terminal in San Juan without a permit. “None of this is a conflict,” he said.

At the press conference, New Fortress Energy President and Chief Executive Officer Wes Edens expressed “pride” in the selection of Genera PR and thanked for the “trust they have placed” in the firm.

Edens noted that Genera PR “has a very comprehensive team,” and mentioned PIC Group Inc., which has more than 20 years of experience in power plant operations and maintenance in several countries. He said that together with their partners, they are ready to take on the challenges ahead.

Brannen McElmurray, the co-founder of New Fortress Energy, was introduced as president of Genera PR.

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