Type to search

Featured General Biz News

Genera PR tapped to run Puerto Rico’s energy generation

New Fortress Energy subsidiary Genera PR has been selected to operate, maintain and eventually decommission the Puerto Rico Electric Power Authority’s (PREPA) aging power-generation assets, through a 10-year agreement established via a public-private partnership (P3). The transition period will take 100 days and end June 30.

“With this new [public-private partnership] and in compliance with our public energy policy, we continue to advance the transformation we all want. I am confident that we are on the right track to give our people the reliable and affordable energy system they deserve,” Gov. Pedro Pierluisi said.    

New York-based New Fortress Energy operates power generation facilities in such countries as Angola and Nicaragua. In Puerto Rico, it already has a liquefied natural gas (LNG) terminal that supplies fuel to units 5 and 6 of the San Juan Central power complex. 

Last June, the Federal Court of Appeals for the D.C. Circuit ruled that the company’s San Juan terminal, which began construction in 2019, had not received the Federal Energy Regulatory Commission’s (FERC) go-ahead, specifically regarding a pipe transporting LNG from a floating storage unit at the San Juan Harbor to the San Juan plant, which the agency deemed to be a pipeline under the Natural Gas Act, thus the company was ordered to undergo an agency review. 

Through the P3, Genera PR will receive $22.5 million annually over five years and could receive bonuses or incentives of up to $100 million, pending on whether consumer savings are achieved. The annual payments will be reduced after the first five years of the contract, depending on the number of decommissioned power plants, the government’s Public-Private Partnership Authority’s (P3A) Executive Director Fermín Fontanés said. 

The official said that Genera PR “counts on PIC Group Inc. for services in the areas of employee evaluation, recruitment, training and classification of personnel.”

However, “Prepa is the owner of the assets,” Pierluisi stressed, adding that the public utility “is the one that receives federal funds in coordination with [the Central Office for Recovery, Reconstruction and Resiliency (COR3)], which has that direct relationship with the federal government.”

“On the other hand, the contract gives Genera PR the opportunity of achieving incentives if they achieve savings, and the savings they achieve in operational costs of these plants will be shared 50/50 with the people of Puerto Rico,” the governor added. “This contract has been structured to incentivize Genera PR to improve the Authority’s performance in diverse areas and to lower the Authority’s costs, also aiming at lowering electricity costs for the people of Puerto Rico.”

Meanwhile, the Puerto Rico Energy Bureau is tasked with approving the budget for those costs, such as fuel, for which Genera PR has to come up with an action plan and present it to the regulator, the governor said. 

New Fortress Energy founder and Chief Executive Wes Edens, who was at the news conference held in a San Juan hotel, said his company has a “large portfolio” and purchases fuel from a number of producers, such as Shell.

“We are also on the verge of producing our own fuel so we have a large fuel source. The total fuel bill here in Puerto Rico is about $3 billion roughly and the vast majority of that fuel comes from sources other than ourselves,” the billionaire investor said. “Providing fuel or finding fuel at the lowest possible costs will be one of the main priorities because that’s where much of the cost savings can be for the island, so it will be a big focus of ours. And to provide fuel at the lowest cost takes a deep understanding of both the fuel markets internationally and, of course, logistics and shipping as well. And I believe that is one of the reasons we were selected. We think we have a deep understanding of those parts of the business and provide a tremendous amount of value for Puerto Rico and to Prepa as a result.”

Genera PR was selected by the P3A after a competitive process that began in May 2020 in compliance with the requirement established by Act 120 of 2018, or the Puerto Rico Electric System Transformation Act. Although the selection was voted on by the utility’s governing board, member Tomás Torres, who represents the public’s interest, told the Associated Press that he believed the new multimillion-dollar contract would result in costlier bills for electric service subscribers.

And besides the island government and energy bureau’s approval, the contract was also greenlighted by the federally established Financial Oversight Management Board (FOMB) for Puerto Rico.

Based in San Juan, Genera PR was founded by New Fortress Energy as a power and energy service provider to support the island’s 12 energy facilities. Under the agreement, Genera PR will “operate, maintain, decommission and modernize the PREPA-owned thermal power generation system of approximately 3,600 [megawatts (MW)] after a mobilization period.” In this role, Genera PR will manage the operating budget, fuel contracts and federal funds for the generation fleet on behalf of Prepa, the company said in a news release.

“All Puerto Ricans deserve access to clean, reliable and low-cost power,” Edens said. “As large investments are made to modernize Puerto Rico’s grid and transition to renewable energy, this partnership will provide meaningful cost savings for consumers and businesses, improve reliability and reduce the environmental impact of an aging thermal generation system. We believe Puerto Rico’s transformation to renewables supported by low-carbon fuel will be a model for markets around the world and a significant step forward in our company’s mission.”

With this development, Puerto Rico’s electrical system continues to be transformed and transitioned toward the integration of renewable energy sources as established by the Integrated Resource Plan (IRP) and Puerto Rico‘s public energy policy.

Over the next few months, Genera PR will work with the government of Puerto Rico and Prepa in the mobilization phase to transfer operations and onboard the public utility’s workforce.

Among the key features found in Genera PR’s proposal are “cost-savings for the benefit of Puerto Rico’s ratepayers through fuel management and streamlined operations; improved “reliability and efficiency across the generation system with a focus on distributed power and microgrids; the retirement “of antiquated power plants while ensuring there is reliable, low-cost and cleaner generation in load centers to support the transition to renewables; and a commitment “to local hiring and plans to recruit, train and incentivize employees.”

Oversight board-backed
“Puerto Rico needs and deserves more reliable, more affordable, and cleaner energy,” the island’s FOMB said in a statement.

The board emphasized that the local energy sector’s transformation rests partly on transitioning the management of Prepa’s power plants to a private operator, which will also assume responsibility for environmental compliance, safety and decommissioning old plants.

“Following a multi-year competitive bidding process to attract and identify qualified candidates to manage PREPA’s electric generation operations, the Puerto Rico Public Private Partnerships Authority (P3A) and PREPA selected Genera PR LLC to operate and maintain legacy power plants,” the board specified.

The oversight panel said it reviewed the proposed “Thermal Generation Facilities Operation and Maintenance Agreement “with Genera PR in accordance with the Puerto Rico Oversight, Management and Economic Stability Act.

“The proposed agreement with Genera PR is a key element of Puerto Rico’s energy transformation defined in the Fiscal Plan, ensuring a reliable and cleaner source of power while Puerto Rico moves towards the renewable energy goals defined by Puerto Rico’s Act 17-2019,” the board said, adding that it supports those goals and approved the agreement.

“Decades of mismanagement and neglect have left Puerto Rico with an expensive, inefficient, and dated energy system,” the board said. “The Fiscal Plans and Act 17 call for the unbundling of the electric system from a monopoly into one in which the power plants and grid are operated by different parties with private sector expertise. The people of Puerto Rico retain ownership of the grid and power plants and are empowered to hold the private operators accountable.”

Meanwhile, Puerto Rico House Finance Committee Chair Jesús Santa told News is My Business that Puerto Rico needs to stabilize its electric power generation and transmission system.

“This is not a secret. It also needs to diversify its [energy] sources to evolve to clean energy production,” the lawmaker assured. “From the Legislature, we will be discharging our fiduciary and oversight duties to investigate and evaluate the performance of Genera PR, ensuring that these goals are met in a transparent manner, consistent with the needs of our country, which requires a robust electrical infrastructure that leads to greater economic dynamism and competitiveness, at reasonable prices.”

Author Details
Author Details
This story was written by our staff based on a press release.

Leave a Comment

Your email address will not be published. Required fields are marked *