Puerto Rico’s P3 Authority in Landmark Agreement With Genera for Operation of PREPA’s Legacy Generation Assets
January 26, 2023
Cleary Gottlieb advised the Puerto Rico Public-Private Partnerships Authority (P3 Authority) in a landmark transaction intended to continue the transformation of Puerto Rico’s electric sector.
The firm advised the P3 Authority in the successful procurement and entry into a 10-year operation and maintenance agreement (O&M agreement) between Genera PR LLC (Genera), the P3 Authority, and the Puerto Rico Electric Power Authority (PREPA) whereby Genera will manage, operate, maintain, and decommission, where applicable, certain base-load generation plants and gas turbine peaking plants (legacy generation assets). Genera is a Puerto Rico company wholly owned by New Fortress Energy Inc. (NFE).
The O&M agreement with Genera, announced by the P3 Authority on January 25, 2023, is the culmination of a more than two-year process and represents a historic milestone in the government of Puerto Rico’s objective of providing modern, affordable, resilient, and reliable power to the island, which will help serve as a driver of economic recovery and growth. Previously, Cleary represented the P3 Authority in the successful procurement and entry into a 15-year operation and management agreement between LUMA Energy LLC (LUMA), the P3 Authority, and PREPA, whereby LUMA operates, maintains, and modernizes Puerto Rico’s transmission and distribution (T&D) system.
Since the fall of 2018, Cleary has represented the P3 Authority, which is tasked with leading the transformation of PREPA, Puerto Rico’s vertically integrated electric service provider. PREPA is one of the largest public electric utility providers in the U.S. by customers served, with approximately 1.5 million customers. Cleary assists the P3 Authority in pursuing a multipronged strategy to rebuild the island’s energy system utilizing PPPs, which began with the T&D system and continued with the legacy generation assets. The P3 Authority launched the legacy generation assets management procurement process with the objective of increasing cost efficiency while achieving improved safety, reliability, power quality, and efficiency of the legacy generation asset operations by implementing industry best practices and operational excellence through private sector expertise and managerial continuity. The P3 Authority was keenly focused on implementing a robust, competitive, and transparent procurement process to identify the private partner best positioned to accomplish the project’s objectives, resulting in the selection of a world-class partner like Genera.
The transformation process has taken place against a background of unique and unprecedented challenges: the utility’s infrastructure was devastated by Hurricanes Maria, Irma, and Fiona, as well as significantly impaired by a series of earthquakes in late 2019 and 2020; PREPA’s prolonged and contested bankruptcy process; an unexpected change in government during the process in 2019; and strict shelter-in-place measures and other restrictions were put in effect on the island in 2020 and 2021 to prevent the spread of COVID-19.
For more information, please see the press release here.