Puerto Rico’s bankrupt public power utility signed a long-term deal to outsource the business of delivering electricity, making an expensive bet that private operators can curb the high costs and service problems that have long plagued consumers, WSJ Pro Bankruptcy reported. The U.S. territory’s government-owned power monopoly is putting a consortium of operators including infrastructure contractor Quanta Services Inc. in charge of running the electricity grid for 15 years, hoping they can reverse years of mismanagement. The operators are inheriting steep challenges as they take over an energy system crippled by years of under-investment, a legacy of political interference and lasting damage stemming from the 2017 hurricane season. The deal marks a seminal moment for the Puerto Rico Electric Power Authority, which emerged as a crown-jewel public asset during and after World War II, powering the island’s industrialization efforts and helping turn it into a manufacturing hub for pharmaceuticals and medical devices. The utility, known as Prepa, became less efficient over time, skimping on capital investments while piling up debt. When Puerto Rico sank into recession more than a decade ago, demand for power from industrial and residential customers declined, stretching the utility’s finances to the breaking point by 2014. Putting the consortium — Quanta and its partners ATCO Ltd. and IEM — in charge of the grid will come at a cost, including a roughly $60 million mobilization fee during a yearlong transition period. In subsequent years, the operators will also receive fixed annual service fees adding up to hundreds of millions of dollars over time, with the potential for additional payments based on performance metrics.
