PRASA to drain rate stabilization fund to pay $90M debt
The Puerto Rico Aqueduct and Sewer Authority is considering dipping into its rate stabilization fund to pay off $90 million due to creditors by month’s end, which would drain the reserve entirely, utility officials said Monday.
The agency’s management asked the board of directors to approve the proposal to use the money in the fund, which was put up as collateral, to pay off $75 million due to Bank of America and $15 million due to Banco Popular de Puerto Rico by the Feb. 29 deadline.
Both banks gave PRASA an extension late last year to meet its obligations. At that time, Banco Popular conditioned the allowance of extra time to getting a $5 million advance on the debt by Jan. 31. PRASA Finance Director Efraín Acosta confirmed Monday that would be paid.
Canceling the pending debt by month’s end will save PREPA some $600,000 in interest payments. However, using up all of the money available in the Rate Stabilization Fund could trigger a water rate increase by 2017, if the budget approved by the board includes a deficit, Acosta said.
“According to our budget projections, we won’t have that to mitigate new rate increases. But with the new fiscal plan we have, that includes establishing a separate entity to issue securitization debt, that may not happen,” Acosta said, referring to Bill 2786 filed last week by Rep. Rafael “Tatito” Hernández proposing a revitalization plan for PRASA.
During the board meeting, PRASA Executive Director Alberto Lázaro said several scenarios were considered to address the pending debt, but none offered any other alternative to using the money in the fund.
“The $90 million have to be paid and we have to do it with the collateral, because there’s no other source of financing,” he said. “Knowing that all of our projections show we have to pay it, we may as well do it now and save ourselves $600,000 in interest.”
Board members held off from authorizing the proposed transaction on Monday, saying they needed to see the details in writing prior to voting. The decision could be disclosed during PRASA’s next board meeting on Feb. 16.