NEW YORK, April 1 (Reuters) - General Electric would commit to financing a new natural gas plant in Puerto Rico under a debt restructuring plan proposed by creditors of the island’s struggling power utility, according to plan documents obtained by Reuters.
The plan, which also includes creation of more than 3,400 new jobs, comes during ongoing negotiations between the Puerto Rico Electric Power Authority (PREPA) and its creditors to restructure the utility’s $9 billion in debt.
Reuters reported on Saturday that an ad hoc group of PREPA creditors, including OppenheimerFunds and Franklin Templeton, offered $2 billion to finance a turnaround at PREPA, $1.2 billion of which would fund a new natural gas facility.
While it remains to be seen if PREPA will accept the proposal, new financing could stave off a messy default that would reverberate around the U.S. municipal bond market, and allow the utility to modernize its business, a key element in fixing Puerto Rico’s ailing economy.
Early on Wednesday, an overview of the creditors’ plan, which has not been released publicly but was obtained by Reuters, showed that the proposed natural gas facility in Aguirre, near Puerto Rico’s southern coast, would be financed and operated by GE, which would sell the power to PREPA under a purchase agreement similar to the one PREPA currently has with EcoElectrica.
A spokeswoman for GE did not respond to requests for comment on the financing of the Puerto Rico plant.
The plan also projects creating 3,445 new jobs, including 2,300 from the construction of 25 new solar power facilities. It projects charging consumers a rate of 21.7 cents per kilowatt hour, or 22 percent less than the highest rate charged in 2014.
It is unclear how much momentum the proposal has, and its feasibility may be challenged.
Two people close to the matter told Reuters last week that PREPA is lukewarm to the offer.
Stephen Spencer, a financial adviser to the creditors who proposed the plan, in a statement called the plan “a big step toward restoring market confidence in the overall island economy”.
PREPA has been in restructuring talks for months as the slide in oil prices has emboldened creditors to resist taking haircuts on their debt.
Puerto Rico has lobbied the U.S. Congress to allow PREPA and other struggling utilities to file for bankruptcy, which would make it easier to impair creditors.
Restructuring PREPA would go some way toward resolving a major uncertainty for investors at a time when the U.S. commonwealth is seeking to raise around $3 billion to stabilize its finances. (Editing by Muralikumar Anantharaman)