The Puerto Rico Aqueduct and Sewer Authority’s (PRASA) board of directors on Tuesday authorized the creation of a Memorandum of Understanding to provide staff and services to the PRASA Revitalization Corp., formed recently to provide external financing to the cash-strapped water utility.
In its regular meeting on Tuesday, PRASA Executive Director Alberto Lázaro told board members that the independent corporation created through Law 68 of 2016 lacks employees and resources to operate and carry out the work it needs to do “to eventually benefit PRASA with financing through securitization bonds proposed by the same law.”
The draft of the proposed MOU, will be revised and signed on a yet-unspecified date, is modeled after the one entered into between the Puerto Rico Electric Power Authority and its own revitalization corporation created as part of the power utility’s restructuring agreement with creditors.
“Their MOU calls for PREPA to manage and pay for administrative transactions, contracts and hiring, and subsequently get reimbursed by the revitalization agency,” Lázaro explained.
Similarly, through its MOU, the water utility would become the PRASA Revitalization Corp.’s operating arm, “until it has enough resources to act on its own,” Lázaro said.
Board member Maricarmen Ramos de Szendrey raised an issue during Tuesday’s board meeting related to a possible conflict of interest between the utility and the new corporation, specifically related to who will eventually chair the PRASA Revitalization Corp.’s separate board.
At one point during the meeting, it was mentioned that the PRASA executive director would head the corporation’s board, but Lázaro rejected that possibility. The MOU will be revised to reflect that concern, the board determined after several minutes of discussion.
The PRASA Revitalization Corp. will not begin operating until a securitization transaction is conducted. If such a transaction does not materialize, the corporation will remain idle, said PRASA Finance Director Efraín Acosta.
“When the transaction takes place, which we hope is not too far in the future, we’ll have a board that isn’t linked to the government,” he said. “Furthermore, we expect that the only future relationship between the Revitalization Corp. and PRASA will be the servicing agreement through which PRASA will be collecting the new charge and reverting it to the corporation [to cover the securitization bond issue.]”
PRASA needs to shore up about $750 million in new money to cover its operating expenses, including its debts with contractors and suppliers.