Puerto Rico Seeks $300M Loan, Warns of Power Shutdown

After a federal judge denied a Puerto Rico power company's request to loan US$1 billion, the federal control board representing the U.S. territory has put in a request for a loan amounting to US$300 million for Puerto Rico’s power company, warning the island would have to start rationing electricity. 

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On Friday, the control board announced that it is still reviewing the plans as part of its overall fiscal plan, further extending the deadline to approve those by over a month.

The Caribbean island is still recouping from the effects of Hurricane Maria that left the island destroyed in September, and more recently, blackouts resulting from a power station blast. Currently, nearly 400,000 customers don't have access to electricity, according to the Associated Press. 

Ernesto Sgroi, president of the governing board of Puerto Rico's Electric Power Authority, said the reduction in power generation would start Sunday and is not expected to interrupt service. However, the reduction could destabilize a power grid still being repaired after it was heavily damaged by Hurricane Maria. 

"Without the loan, and given the potential risk to its operations, we have no other responsible option than to begin implementing a limited operational emergency plan," Sgroi said, according to the Associated Press. "We fear this setback will result in the exacerbation of human hardship as potable water, power for medical procedures, communications and open schools are at risk of disappearing again."

"Hurricane Maria and decades of underinvestment have left Puerto Rico’s power system in shambles. While more than two thirds of connections have been restored, reliability remains poor, as demonstrated by last weekend’s explosion and power outage in San Juan," Gregory Makoff, a senior fellow with the Canada-based think tank, Centre for International Governance Innovation, wrote in The Hill. 

The Puerto Rico Electric Power Authority, Prepa, is valued at US$4 billion but has a debt of approximately US$9 billion. 

Earlier in January, Puerto Rican Governor Ricardo Rossello announced that the island's bankrupt power company will be privatized. 

Currently Prepa "spends over 60 percent of its budget on buying expensive fuel for inefficient machinery that is 50, 60 years old," Rossello said, according to the Financial Times. He added that Puerto Rico is seeking investments for an efficient operator to churn out profits while also diversifying energy in order to lower costs for customers. 

Tesla was among 19 companies that recently submitted proposals for energy projects, he added.