UPDATE 1-Puerto Rico utility needs deal to avert blackouts -executive

martes 12 de enero de 2016 16:23 GYT
 

(Recasts with comments from committee)
    By Megan Davies
    NEW YORK, Jan 12 (Reuters) - Puerto Rico could face
widespread blackouts if its power utility, PREPA, runs out of
cash, the company's chief restructuring officer told a
congressional panel on Tuesday, arguing that the utility needs
access to federal bankruptcy law to help close a deal to
restructure its debt. 
    The island suffers from high energy costs, old, inefficient
power plants and a dependency on oil, all of which contribute to
the island's fiscal problems. It is trying to restructure its
$70 billion debt and has defaulted on some payments. 
    PREPA's Lisa Donahue told the House Committee on Natural
Resources subcommittee on energy and mineral resources that
without a restructuring the utility will run out of money in the
first half of this year - which leave suppliers unwilling to
supply fuel.
    "That would mean we would be in a situation where there
would be blackouts and major conservation," Donahue said. "It
would be in my opinion a disaster if PREPA would runs out of
cash ... it would be blackouts across the island." 
    PREPA, which provides electricity to Puerto Rico's roughly
3.5 million residents, charges consumers far more than what 
customers on the U.S. mainland pay on average. The utility has
also been under pressure to convert from burning oil to
generally cheaper and cleaner natural gas.
    PREPA in December reached a long-awaited deal with creditors
to restructure its more than $8 billion debt. 
    However, creditors holding around 30 percent of the debt are
not party to the deal and additional bondholders holding more
than $2 billion of bonds must voluntarily agree for it to
succeed. A source familiar with the situation said that the deal
currently has support from creditors holding around 70 percent
of bonds and needs to obtain 90 percent support.
    Donahue said in written testimony that use of federal
bankruptcy laws would ensure 100 percent participation. 
    However, Stephen Spencer, financial advisor to PREPA's 
bondholder group, said that access to Chapter 9 bankruptcy is
not necessary and risks resulting in "endless litigation and
political sniping." 
    "On the contrary, we doubt whether we ever would have been
able to get this far and reach the consensual restructuring
agreement we have," had Chapter 9 been in place, said Spencer. 
    Extending Chapter 9 to Puerto Rico - which currently does
not have the ability to put its public agencies into bankruptcy
- has been long debated. A proposal is before the House
Judiciary Committee. Democrats have been generally supportive
but a number of Republicans have shown skepticism. 
    "Nothing said in this hearing ... should be interpreted as
encouraging Puerto Rico to delay addressing their own fiscal
situations," said Idaho Representative Raul Labrador, a
Republican, who said he would not support federal legislative
action to help the island if "those responsible for the debt do
not act in good faith to come up with their own solutions."

 (Additional reporting by a contributor in San Juan and Nick
Brown; editing by G Crosse nd Steve Orlofsky)