Report: $110M Genera buyout could save PREPA up to $644M over 10 yrs
A proposal by Genera PR to forgo all fuel optimization incentives under its 10-year operating and maintenance agreement (OMA) in exchange for a lump sum payment of $110 million would generate significant savings for the Puerto Rico Electric Power Authority, according to a February 2025 report by FTI Consulting.
The report was released this week to the Institute for Competitiveness and Economic Sustainability (ICSE, in Spanish) following a court order, as reported by News is my Business. The Puerto Rico Energy Bureau had delayed releasing the document for months despite ICSE’s repeated public records requests.
Prepared at the request of the Public-Private Partnerships Authority, the analysis evaluated the net present value of the proposed amendment to the Genera contract. Genera has offered to eliminate all future incentive payments — typically tied to cost savings and performance metrics — in return for the lump sum, which would be paid in 11 monthly installments.
“Assuming the 10% discount rate, the NPV of PREPA’s avoided future incentive payments ranges from $322 million to $644 million,” the report stated. “As a result, the $110 million lump sum to be paid over 11 months is beneficial to PREPA.”
Gov. Jenniffer González previously cited the report’s findings, arguing the payment would not harm consumers.
The analysis modeled two performance scenarios: one in which Genera earns the maximum annual incentive of $100 million and another where it earns only 50%. In both cases, the lump sum deal produced a favorable outcome for PREPA over the contract period.
FTI Consulting noted that incentive oversight under the current OMA has been difficult. Required annual performance tests at the power plants have not been carried out due to operational constraints. As a result, LUMA relies on estimated metrics for dispatching, similar to PREPA’s legacy practices.
“Documenting actual fuel cost savings versus avoided costs, while desirable, is difficult to track,” the report said. Although avoided costs were not part of the original contract, the report concluded they “do, in fact, provide substantial benefits to PREPA.”
The OMA includes incentive categories such as operational cost efficiency, fuel optimization, equivalent availability factor, environmental and safety compliance, and reporting. Annual incentives are capped at $100 million, with overages carried forward to future years.
For example, operators could earn up to 50% of cost savings through improved fuel efficiency or operations. The agreement also imposes penalties for environmental violations, safety incidents, late reporting, and underperformance — some of which trigger default provisions.
The proposed amendment would eliminate incentive payments but leave penalties in place.
“All penalties for safety, reporting, environmental violations and equivalent availability remain,” the report stated.
The analysis applied three discount rates — 8%, 10% and 12% — to assess the financial impact. Under all scenarios, the lump sum payment was less costly than maintaining the current incentive structure.
At a 10% rate, PREPA would avoid between $322 million and $644 million in future payments. Total incentive costs under the existing agreement could reach $805.5 million, the report added.
The document was authored by Ellen S. Smith, senior managing director at FTI Consulting.
