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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, Reuters reported. 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.

The federal board overseeing Puerto Rico’s finances yesterday asked the bankrupt U.S. territory to submit a new fiscal turnaround plan by Dec. 22, taking into account damage caused by Hurricane Maria, Reuters reported. Speaking at the board’s public meeting in San Juan, Executive Director Natalie Jaresko said the board would approve or reject the revised draft by Jan. 12. The meeting, the first since Maria made landfall on Sept. 20, is a shift back to focusing on Puerto Rico’s troubled finances, which have taken a back seat in recent weeks as the island has tried to recover from the hurricane. Maria decimated Puerto Rico’s infrastructure, killing at least 50 people and knocking out power to all 3.4 million residents. Six weeks later, just 30 percent of power has been restored. Before the storm, the board and Governor Ricardo Rosselló had agreed on a 10-year blueprint for how to reverse the island’s decade-long recession and restructure a crushing $72 billion debt load. The new plan must be for five years instead of 10, and like the original blueprint it should focus on promoting new investment, including through pension reform and corporate tax reform, Jaresko said. Read more. 

In related news, Puerto Rico called on U.S. mainland utilities to help restore power nearly 6 weeks after Hurricane Maria knocked out electric service to all of the U.S. territory’s 3.4 million residents, Reuters reported. Puerto Rico Electric Power Authority (PREPA) Executive Director Ricardo Ramos sent a letter yesterday to utility industry trade groups requesting assistance from U.S. mainland utilities, they said. Restoration of power on the island will now shift toward other utilities and the U.S. Army Corps of Engineers after the Puerto Rican government removed a small Montana contractor. Puerto Rico canceled a $300 million contract between PREPA and Whitefish Energy Holdings, which had been rebuilding the island’s power system since early October. The Army Corps said that it planned to boost the size of a contract awarded to engineering firm Fluor Corp by $600 million, to $840 million, according to a government filing. Read more. 

The Federal Bureau of Investigation is investigating a decision by Puerto Rico’s power authority to award a $300 million contract to a tiny Montana energy firm to rebuild electrical infrastructure damaged in Hurricane Maria, the Wall Street Journal reported today. Agents from the FBI’s San Juan field office are looking into circumstances surrounding the deal that the public power monopoly known as PREPA signed with Whitefish Energy Holdings LLC. Puerto Rico Gov. Ricardo Rosselló canceled the contract Sunday, saying that it had become a distraction from the U.S. territory’s efforts to restore the devastated grid. Only 30 percent of the island’s power customers have had electricity restored. The Federal Emergency Management Agency, multiple congressional committees and local auditors also have raised concerns and begun requesting documents about the deal. The House Committee on Natural Resources said yesterday that it would hold hearings over the next three weeks on the storm recovery and on transparency in the reconstruction process. Ricardo Ramos, executive director of PREPA, had defended the Whitefish pick and said the contracting process was done according to the utility’s regulations for handling emergency situations.

Puerto Rico’s government power company said on Sunday it will cancel a $300 million contract with a tiny Montana company to restore power to the storm-hit U.S. territory after an uproar over the deal, Reuters reported today. The contract between Whitefish Energy Holdings and Puerto Rico’s bankrupt power utility came under fire after it was revealed last week that the terms were obtained without a competitive public bidding process. Residents, local officials and U.S. federal authorities all criticized the arrangement. The cancellation could further complicate Puerto Rico’s most pressing challenge from the territory’s worst storm in 80 years — restoring power to its 3.4 million residents. Nearly six weeks after Hurricane Maria devastated the island, only about a quarter of homes and businesses have power, and the utility has set a goal of having 95 percent of power back by the middle of December. Several other utilities have been involved in recovery efforts, but Whitefish said they had more than 350 people on the island. Puerto Rico Electric Power Authority’s (PREPA) Director Ricardo Ramos said that he had to consider the “delay risk” of agreeing to cancel the contract. The territory has reached out to officials in Florida and New York, which have already sent people to Puerto Rico, to send more crews in the event that Whitefish departs.

A U.S. congressional committee yesterday set a Nov. 2 deadline for the Puerto Rico Electric Power Authority (PREPA) to provide information related to its $300 million contract with a small Montana firm to repair damage to the utility’s infrastructure caused by Hurricane Maria, Reuters reported. “Specifically, the size and terms of the contract, as well as the circumstances surrounding the contract’s formation, raise questions regarding PREPA’s standard contract awarding procedures,” the chairman of the House Natural Resources Committee, Rob Bishop, said in a letter to PREPA’s executive director, Ricardo Ramos. Media reports that Whitefish Energy Holdings entered the contract with PREPA to fix the utility’s power grid raised questions among Democrats in Congress and others when it was disclosed that the Montana firm won the contract without a competitive bidding process. The two-year-old company had only two full-time employees and was rapidly hiring workers to tackle the job of patching up the destroyed power grid that has left most of the U.S. territory without electricity for weeks following the destructive hurricane.

An informal survey by Puerto Rico’s Chamber of Food Marketing, Industry and Distribution of 15 of its members found that there are roughly 1,400 containers of their provisions sitting in U.S. ports, waiting to be shipped to Puerto Rico, according to a commentary in today’s Wall Street Journal. The group attributes the delay to the Jones Act, which mandates that U.S.-flagged, -built and -manned carriers conduct all shipping between U.S. ports. This means an oligopoly of three companies—Crowley Maritime Corp., TOTE Maritime and Trailer Bridge Inc.—conduct the vast majority of the protected trade between the mainland and the island, at inflated costs on aging ships. The ocean-going Jones Act fleet numbers a mere 99 vessels, compared to thousands available from foreign-flagged carriers, according to the commentary. President Trump did give Puerto Rico legislative relief of the Jones Act for 10 days following the devastation of Hurricane Maria. Eduardo Marxuach, president of Supermercados Econo, says it’s “impossible” to book a foreign carrier in such a short time frame. GOP Senator John McCain introduced legislation earlier this year to repeal the Jones Act, while other legislators are pushing to exempt Puerto Rico from the protectionist law, either permanently or for a few years. But without Congressional leadership and White House support, these measures won’t go far, according to the commentary.

U.S. District Judge Laura Taylor Swain granted a motion yesterday that forbids Puerto Rico from using disaster relief money to repay creditors who are owed roughly $72 billion in debt repayments, Reuters reported. The motion, filed by the government of Puerto Rico earlier this month, sought to ensure the money distributed by the Federal Emergency Management Agency in the wake of Hurricane Maria would be reserved for cleanup. Judge Swain granted the motion from the bench during a hearing in New York yesterday, according to court documents. FEMA funds will be used “solely for their intended and required purposes, will be deposited into segregated and non-commingled accounts, and will not be subject to any existing creditor or third-party claims,” the motion said. Read more. 

In related news, U.S. officials supervising Puerto Rico’s finances are installing an emergency manager at the island’s public electricity utility, in an attempt to course-correct a disaster response that has come under congressional scrutiny, the Wall Street Journal reported today. Puerto Rico’s financial oversight board is appointing the emergency manager to take over the public electricity monopoly, known as PREPA, with an eye toward its eventual privatization, according to people familiar with the matter. The maneuver would largely wrest control of the utility away from its board of directors and Gov. Ricardo Rosselló. More than a month after Hurricane Maria knocked out power to all of PREPA’s customers, service has been restored to roughly a quarter of them. PREPA’s contracting decisions in the wake of the storm, including its use of a tiny Montana-based firm to rebuild power lines, have raised concerns among members of Congress about the utility’s management. Read more. (Subscription required.) 

The Senate sent President Donald Trump a $36.5 billion hurricane relief bill Tuesday that gives Puerto Rico access to $4.9 billion in low-interest Treasury loans, amid concerns that recovery efforts from the recent disasters will require significantly more funding, Bloomberg News reported. The measure, passed 82-17, also would replenish the troubled National Flood Insurance Program, which runs out of money as early as this week. The vote followed a failed push by Majority Whip John Cornyn of Texas to insert more disaster recovery aid into the bill for his state, hit hard by flooding from Hurricane Harvey in late August. Democrat Bill Nelson of Florida also pushed unsuccessfully for up to $3 billion more for his state’s citrus industry. Cornyn told reporters Trump assured him that the White House would request the funds for Texas in November. The legislative package that passed the Senate also contains the Bankruptcy Judgeship Act of 2017 that will:

- Extend the temporary judgeships by 5 years in certain districts;

- Amend chapter 12 of the Bankruptcy Code;

- Increase the quarterly fee payable to the U.S. trustee by chapter 11 (reorganization) debtors whose disbursements equal or exceed $1 million in a fiscal year unless the balance in the U.S. Trustee System Fund exceeds $200 million.

For the full bill text and provisions, please click here.

Puerto Rico and Whitefish Energy Holdings yesterday defended their $300 million contract for the small Montana company to repair the U.S. territory’s hurricane-ravaged power grid after the deal was criticized by U.S. lawmakers, Reuters reported. The back-and-forth comes as Puerto Rico struggles to restore power to more than 80 percent of the island a month after Hurricane Maria made landfall. Whitefish last month signed a deal with Puerto Rico’s quasi-public power utility, PREPA, to help fix a grid that was nearly destroyed by Maria, the strongest storm to hit Puerto Rico in 90 years. Whitefish was awarded the deal without a competitive bidding process, and despite the facts that it had just two full-time employees and was established only two years ago. That drew criticism from legislators who suggested cheaper options might have been available. Governor Ricardo Rosselló said in a statement yesterday that his administration would review PREPA’s contracting practices and forward findings to the island’s comptroller. Rosselló defended the deal, saying that it was necessary to ensure Puerto Rico would have workers in place quickly. Read more. 

In related news, Franklin Resources Inc., one of Puerto Rico’s largest creditors, sold hundreds of millions of dollars of the island’s bonds in recent days, part of an exodus of investors hurt by accelerating losses in the wake of recent hurricanes, the Wall Street Journal reported today. A swath of mutual funds and hedge funds who held on to Puerto Rico’s roughly $70 billion of bonds even after the island started bankruptcy proceedings last year are now throwing in the towel. That includes Franklin Mutual Advisers LLC, a Short Hills, N.J.-based unit of Franklin Resources, which has sold its entire $294 million stake in Puerto Rico general obligation bonds, people familiar with the matter said. Bonds with a total face value of $8.24 billion have changed hands from the beginning of the month through October 23, more than in any other full month since the beginning of 2015, according to Municipal Securities Rulemaking Board data. The only time trading approached that amount was July 2015, after Puerto Rico’s then-governor said that the island’s debts were “not payable.” Read more. (Subscription required.)