By Cándida Cotto / CLARIDAD
The Electric Power Authority (PREPA) awarded a contract for $ 1,500, in a process riddled with irregularities, with unfair advantages and without demanding any guarantee of cost reduction, to the company News Fortress Energy (NFE), for the gasification and operation of units 5 and 6 of the San Juan Power Plant.
The complaints about the contract are contained in an extensive study of the Institute of Energy Economics and Financial Analysis (IEEFA) and the organization Cambio, which followed the hiring process. The report was released by TomSanzillo, Director of Finance atIEEFA and engineer Ingrid Vilá Biaggi, from Cambio.
According to the authors, the contract provides another example of the mismanagement and lack of accountability that have led to the agency and Puerto Rico to its current state of insolvency.
“This is PREPA's first major project related to generation since the hurricanes. After previous serious contractual scandals, it was important for PREPA to reestablish public confidence that the agency had learned from previous experiences of mismanagement and scandals. In this case, we see that PREPA has failed, "said Tom Sanzillo.
Meanwhile, Vila Biaggi, president of the non-profit organization, CAMBIO, emphasized:" PREPA executives have continually failed to take action necessary to transform the agency's governance, guarantee transparent processes and effective citizen participation, as well as invest in distributed renewable resources. Our evaluation of public documents shows that the Authority implements a fragmented approach, project by project, which opens the door for external interests to promote their own projects and makes it more likely that PREPA will over-build its generation system and not meet the objectives of renewable energy. "
According to experts in the field of energy, the analysis of public documents, which were obtained through litigation filed by IEEFA and CAMBIO, show that PREPA not only ignored its own rules but also did not carry out rigorous evaluations of the environmental, safety and health impacts of the project.
Among the processes that PREPA did not comply with are those that did not carry out an economic or fiscal analysis to show how the conversion of gas would save consumers money; it did not require these savings as part of the contract. NFE had stated that the project would save $ 285 million annually, an amount above PREPA's estimate of $ 150 million per year and well above the estimate of the Board of Supervision and Financial Administration (FOMB) in its approval letter.  Regarding these and other omissions, Vilá Biaggi denounced: “PREPA continued with the natural gas conversions of the San Juan 5 and 6 units without a study of desirability and convenience, despite the fact that it was required by its own regulations. It also proceeded without an environmental impact statement that would have triggered a public participation process. Neighboring communities learned of the project through the media after the contract was awarded. Risks associated with increased natural gas vessel traffic in the San Juan Bay, as well as evaluating more sustainable alternatives, such as rooftop solar energy and storage, were swept under the rug. "
The organizations reported that the report's salient findings:
- After receiving an unsolicited proposal from New Fortress Energy (NFE), PREPA and its financial adviser, Filsinger Energy Partners (FEP), repeatedly met with NFE. This, prior to the writing of the Request for Proposals (RFP) in April 2018 by the Authority.
- While the Request for Proposal was being drafted, PREPA and NFE signed a confidentiality agreement that provided NFE with information for advance on San Juan 5, 6.
- PREPA did not inform potential bidders about NFE's leasing of properties strategically important to the project. PREPA also failed to inform other bidders that it had received an unsolicited proposal from NFE and its numerous communications with the Authority.
- PREPA evaluated the proposals through a committee that included representatives of the FEP who had communicated regularly with New Fortress Energy, they had reviewed their unsolicited proposal and helped evaluate their environmental documents.
- PREPA used an outside attorney to negotiate the contract. The firm also represents entities owned by NFE's parent company, Fortress Investment Group.
The IEEFA and Cambio investigation specifies the confidentiality agreement that, on May 30, 2018, the chief of Engineering and Technical Services of PREPA, Jaime Umpierre, sent a memo to the interim legal director, Astrid Rodríguez Cruz, and acting generation director William Ríos Mera, warning them that PREPA had signed a confidentiality agreement with NFE on March 6, 2018, a month before FEP began drafting the RFP (Request for Proposal). It recommended that the application be denied and the confidentiality agreement be rescinded, to ensure fairness in the RFP process.
The report also sets out the procedure of the JCF. Specifically, it is revealed that the Board approved the project in March 2019, despite expressing concern that the price structure was between 30 and 40% higher than the industry benchmarks.67 This is consistent with the NFE's goal of achieving a profit margin of at least 40% on its gas sales. In contrast to PREPA's initial Board estimate (of more than $ 150 million in annual savings) and NF claims (of $ 285 million in annual savings), the estimated project savings by JSAF would be $ 36 million to $ 56 million per year.69 70In June 2019, the JSAF certified PREPA's Fiscal Plan 2019 stating that the project would provide $ 500 million in savings over a period of five years.
Faced with the revelations of its investigation, IEEFA and Cambio They called for the contract to be revoked and for an immediate evaluation to be made by an official working group made up of federal and state law and order agencies, as well as regulatory entities such as the Office of the Federal Prosecutor, the Department of Justice. of Puerto Rico, the Securities and Exchange Commission, the United States Bankruptcy Court and the Office of the Comptroller of Puerto Rico. These claim that to guarantee transparency and trust, the working group includes persons with legal and criminal expertise, from Puerto Rico and the United States, independent and of good reputation.