Puerto Rico Utility Signs $900 Million Deal It Can’t Afford

REUTERS/Carlos Barria

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Jason Hopkins Immigration and politics reporter
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Puerto Rico’s utility signed a nearly $1 billion deal to repair the island’s power grid, but the bankrupt company has no way of paying for it and may expect the federal government to pick up the tab.

The Puerto Rico Electric Power Authority (PREPA) signed a one-year, $900 million deal on May 26 with Cobra Acquisitions, an Oklahoma-based company, to restore its shattered power grid. PREPA, however, is undergoing bankruptcy and has nowhere near the financial capability to pay for the project. The expensive deal is likely to fall on the lap of the Federal Emergency Management Agency (FEMA).

Hurricane Maria devastated Puerto Rico’s infrastructure in September 2017, leaving its power grid in ruins. The island is still recovering and rebuilding, thanks in large part to Uncle Sam’s piggy bank.

President Donald Trump’s disaster declaration in September 2017 allowed FEMA to fund Puerto Rico’s restoration projects to the tune of hundreds of millions of dollars. PREPA and Cobra previously entered into a $200 million agreement for power restoration services. This contract was expanded twice and grew to cost $945 million by February. FEMA is covering the cost of this deal, as it falls under the president’s declaration. (RELATED: The Death Toll On Puerto Rico From Hurricane Maria Is 73 Times Higher Than Officially Reported, Harvard Study Says)

As for the contract signed on Saturday, however, financial responsibility is not immediately clear. Cobra will be working on emergency efforts, such as completing power line restoration, but other services will center on rebuilding broken grid infrastructure and stockpiling materials in preparation for the next hurricane season — work that goes well beyond the emergency services FEMA has pledged to cover. Will FEMA cover the costs of the latest deal? No one really knows.

Puerto Rican officials have been very clear they have no intention of footing the near one-billion-dollar bill.

“If Cobra is expecting to get paid from PREPA, they have a big problem,” former Puerto Rico Sen. Ramón Luis Nieves stated to Utility Dive. “The contract must have some language about the problem of reimbursement because if it does not, PREPA does not have the financial capability to cover $900 million.”

Officials at Mammoth Energy Services, Cobra’s parents company, have not indicated if FEMA will cover any costs. FEMA has also refused to answer if they will reimburse the project’s costs.

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