Puerto Rico Senate sues against PREPA privatization

Bonds

The Puerto Rico Senate filed suit Tuesday afternoon against the privatization of the transmission and distribution systems of the Puerto Rico Electric Power Authority, though analysts suggest the suit does not have a strong chance of success.

Later Tuesday, a judge in the Court of the First Instance, based in San Juan, issued an order giving Senate President José Dalmau Santiago 24 hours to respond to two legal inquiries, including to tell the court why the Senate had legal standing in the case.

Judge Alfonso Martinez Piovanetti also told the senator to address the legal relevance of the Puerto Rico Oversight, Management, and Economic Stability Act and the Oversight Board’s prior fiscal plan for PREPA, which the board approved on June 29, 2020, and which referred to the LUMA contract the senator is challenging.

The suit came just after LUMA Energy took over the systems Tuesday morning immediately after midnight.

Puerto Rico Senate President José Dalmau Santiago launched a lawsuit Wednesday against the privatization of PREPA’s transmission and distribution systems.

Dalmau Santiago filed the suit on behalf of the Puerto Rico Senate against Puerto Rico’s government, PREPA, the Puerto Rico Public Private Partnerships Authority, LUMA, Puerto Rico Property Registrar Joaquín del Rio Rodríguez, and others.

In his suit, he argued that the transfer of the systems required registration of property changes with the official property registrar and that this had not happened. Specifically, he said the deal violated the island’s Real Estate Registry Law and Law 29-2009 of the PPPA.

He called for the court to declare the transfer deal null and void and he called for the court to order money transferred to LUMA to be handed back.

Dalmau Santiago is a member of the Popular Democratic Party, which generally supports the return of Puerto Rico to its relationship to the United States that it had before the federal imposition of an Oversigth Board on the local government in September 2016. He is in a different party than the governor, who supports statehood for the island and has generally supported the LUMA deal.

The Oversight Board approved a new PREPA fiscal plan on Thursday that also includes LUMA’s takeover of the systems.

On Tuesday evening Puerto Rico attorney John Mudd tweeted, “The LUMA contract is one of administration and it is not mentioned there is a real right that must be registered. At page 64 of the LUMA contract, section 5.3 (b) states that LUMA will collect the fees and deposit them in an account(s) owned by PREPA. I see it very difficult for this suit to succeed.”

PREPA had about $9 billion in total debt outstanding as of May 2017.

The deal between the PPPA and LUMA specifies that LUMA is to operate the transmission and distribution systems for 15 years.

Negotiations concerning restructuring PREPA’s debt have been going on since summer of 2015. A group of bondholders have reached a deal with board but the deal hasn’t been put to a bondholder vote and a court hasn’t yet approved it.

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