FEBRUARY 1969
A SPECIAL REPORT ON
COMMONWEALTH OF PUERTO RICO
GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO SAN JUAN, PUERTO RICO
3a/3«. ' '
1.3/
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J3/-. I%1
PUERTO RICO WATER RESOURCES AUTHORITY
1950 - Our Growth - 1968
Data for the twelve months ended
June 30, 1950
Sales of electricity (Kwh)
.
Revenues from sales
Customers (number) Average sales per customer (Kwh) . . . . Average revenue per customer
$11,170,000
.
$
65.64
519,014,000 96,230 140,560
Generating capacity installed (nameplate Kw). .
$11,317,000
Times Increased
5,203,247,000
12.6
109,643,000 647,000 8,207
9.8
172.94
2.6
6,113,971,000 1,001,500 1,201,840
10.4
$
177,000 2,419
Generation requirements (Kwh) Annual peak demand (Kw) Revenues (total) Current expenses
411,727,000
November 30, 1968
$
3.7 3.4
11.8
8.6
113,755,000 62,393,000 51,362,000
10.1
$ 5,927,000
$ $ $
Contribution in lieu of taxes
$ 1,178,000
$
3,681,000
12,014,000 38,512,000
10.2
Other contractual obligations
$ 5,390,000
Balance of revenues available for debt service . .
Contractual obligations (total)
11.6
8.7
10.5
.
$ 4,859,000
$
50,526,000
10.4
.
$55,572,000
9.9
25,371,000
$ 549,894,000 102,614.000
$80,943,000
$ 652,508,000
8.1
.
$60,545,000
$ 448,001,000
7.4
Equity of the people of Puerto Rico . . . . .
$24,905,000
$
153,563,000
6.2
Electrical plant in service (at cost) Construction work in progress Electric plant (at cost)
Long term debt and outstanding notes
ON THE COVER
Eastern Airlines Building — a recent addition to the San Juan skyline.
4.0
Commonwealth of Puerto Rico PUERTO RICO WATER RESOURCES AUTHORITY
V 7^ i5b0
Officers
Governing Board
RENAN COLON
Chairman: FRANCISCO LIZARDI
Chief Engineer
Vice-Chairman: ANTONIO CUEVAS VIRET Director, Personnel Office
Members: JENARO BAQUERO
JAVIER CUEVAS BENITEZ Acting General Manager - - Services and Supply HAROLD TORO
ANTONIO M. BIRD
General Manager — Irrigation Services
Attorney at Law
JOSE VILA RUIZ General Counsel
CARLOS VELAZQUEZ TORO
Head, Production and Transmission Division Principal Officers
HUMBERTO CORDERO
Head, Distribution and Sales Division
FELIX CORDOVA DIAZ Executive Director
WILLIAM CANDELARIO
DR. MODESTO IRIARTE Assistant Executive Director- - Electrical Planning, Construction and Research
JOSE A. MATOS
Head, Electrical Planning and Research Division
EDUARDO LUBE Assistant Executive Director - - Finance
Head, Power Design and Construction Division JOSE 1. DIAZ Controller
LOUIS ROIG MARTINEZ
JULIO NEGRONI Assistant Executive Director - Power Operations
Treasurer
FERNANDO TORRENT
JAVIER CUEVAS BENITEZ Head, Purchasing Division
Assistant Executive Director — Industrial Relations
RAFAEL VAZQUEZ COLON
and Personnel
Head, Personnel Division HECTOR M. MORALES
Head, Transportation and Services HERMANN MUNOZ
Consulting Staff
Public Relations Officer
RAFAEL R. RAMIREZ Power Consultant
RAFAEL D. CHERVONI
Head, Safety Division
PEDRO COLON PAGAN
Consultant — Engineering and Construction
Trustee
First National City Bank. New York. N. Y. Consulting Engineers Jackson and Moreland Division
of United Engineers and Constructors Inc. Auditors Arthur Andersen & Co.
Bond Counsel
Mitchell, Petty & Shetterly
?iQ pte^
Felix Cordova Diaz Executive Director
Puerto Rico
Water Resources Authority The supply of electric energy in Puerto Rico's fast growing economy is the responsibility of the Puerto Rico Water Resources Authority, an autonomous public service corporation and instrumentality of the Government of the Commonwealth of Puerto Rico.
The origin of the Authority goes back to the opera tion of two government agencies which began the development of hydroelectric power in Puerto Rico
program for the Island was begun as part of "Opera tion Bootstrap." By 1956, for the first time in Puerto Rico's history, net income from manufacturing sur
passed that from agriculture. Today over 1,600 new factories, promoted under the economic develop ment program, are in operation. Such rapid growth and profound change in the basic character of the economy has created a continuous and rapid rise
— the Puerto Rico Irrigation Service, which built its first generating plant in 1915, and the Utilization of Water Resources of Puerto Rico, created in 1927. In 1941, the Authority was established by law to replace
in the demand for energy.
the Utilization of Water Resources and ensure a
shown on the inside of the cover page speak for
growth in the supply of electricity which would be
themselves.
adequate for the future needs of Puerto Rico's eco
Throughout the twenty-seven years elapsed since
the Authority came into being its growth has been steady and most impressive. The comparative figures
at a later date, the electric facilities of various irri
From its inception the Authority has had to con stantly add new capacity to keep up with, and antici pate, the mounting demand for electric power. New generating capacity has been added almost every year. Since 1944 total name plate rating of the Authority's generating plant has risen from 64,440 Kw to the present capacity of 1,201,840 Kw. Annual capital construction programs in recent years have
gation services were integrated into the Authority's
reached as high as $71.9 million.
nomic development. Subsequently, during the World War II fuel shortage, the two large private electric utilities on the Island were taken over by the United State Government as an emergency measure and their operation entrusted to the Authority. In 1944, these systems were purchased by the Authority and,
system.
When the Authority began operations in 1941, the Island's economy was primarily agricultural and heavily dependent on a single crop — sugar. In the latter half of that same decade, an industrialization
The capital construction program for 1968-69 is estimated at $77.9 million. It includes work on units
3 and 4 of 200,000 Kw each at the Palo Seco Steam
Plant. These units are scheduled for completion in 1969 and 1970 respectively. It also includes work
on the fifth and sixth units of the South Coast Plant
which will have a capacity of 400,000 Kw each.
Other important projects included in the program are Unit No. 1 of 400,000 Kw at the new Yabucoa
Steam Plant and several jet peaking units throughout the system. This program also includes general transmission and distribution facilities, rural electrification proj ects, the acquisition of land and the construction of buildings, and other miscellaneous improvements. The Authority has grown to become the second largest municipally owned, integrated electric utility in the United States as is indicated by the following tabulation: Puerto Rico
City of Seattle
Department of Water Resources Department of Water and Power Authority Lighting
Electric
Revenues
Dec^3LI968
No\k3o!I96S Dec^h°/l968
$1,004,797,278
$538,078,846
169,078,839
109,843,391
$308,829,401 48,993,949
Number of
Customers . .
ity at the end of October, 1968 had a name plate rating of 1,201,840 Kw and maximum dependable capacity of 1,295,320 Kw. The physical plant pres ently consists of twenty-two generating stations, of which fifteen are hydroelectric, four are thermalelectric, one is diesel and two are jet peaking units. Thermal-electric facilities now supply about 97 per
cent of the electric energy generated. The Authority's four main generating stations have a total installed name plate rating of 1,066,000 Kw. Steam-Electric Stations
City of Los Angeles
Net Plant . . .
Present Electric System The total installed generating capacity of the Author
1,082,500
Palo Seco Steam Plant — showing two 200,000 Kw units under construction which
will increase the name plate capacity to 575,000 Kw.
The Palo Seco Steam Plant, near San Juan, was
placed in service in 1960 and has two 82,500 Kw steam-electric units and one 10,000 Kw jet peaking unit powered by a kerosene-burning aviation-type jet
motor. This unit is used for peaking and for emer-
Puerto
rico
*»ater
resources
authority
ELECTRIC SYSTEM OCTOBER 31, 1968 •AtAHON -^V'
*0.000 avA \\ SAN JOAN PALO SEC0J420,000 KW EXTENStOli iTS.OOaKwl uUAKn UNatP CONSTR'.rTlonHiW-^
20P00
KW EXTENSION'
r?* a«.Ia®®
AcOS anoClIS 7,90^^ *7.500
3750.V4
CONOtAl
CUATHAAO
COWtlhO PC.HTS ^ ^ X0,OOOK
COACCM ■T.soaiw A
1 '
7.5 00 RVA
UATAOUII YJ.9C0
S.00C «*A coNtmo
VSjOOOAW
,F90KV*
7
A ClOAA ^
CA60AI NO YAM UO«fN/0
■ LSOO
V/fOUES
072KVA
CAMiTt Plan
UflNl
I
■^I.OOOIVA/"
MNA vista-T.SOOKVA
[100,000 R« eiTKaSIOMl . _ ^ " UNOCA COMITAUCTION J LEGEND O THCRttAL PLAMTI O MYORO-tLtCIAlC plants A TRANSMISSION SUBSTATIONS A DISTRIBUTION
- 38KV SUBMARINE POWER CaB'.E 'ITCTRIC transmission linys
bCIISTiNC IIS rv electric transmission lines ■ 119 KV electric transmission lines lOn.Af CoAttfaci RESERVOIRS
SUBSTATIONS
gencies, being designed for automatic synchroniza tion to the line from a cold start in only two minutes. In addition two 200,000 Kw units are in construction
which are expected to be completed in 1969 and 1970. A desalination pilot plant has also been con
structed, to provide 14,400 gallons a day of make-up
The Mayaguez Plant is equipped with two gas turbine generators whose rated capacity is 20,000 Kw each. The main purpose of these turbines is to handle peak loads. A 10,000 Kw jet peaking unit was also installed increasing the capacity of this plant to a name plate rating of 50,000 Kw.
water for the main unit boilers. The desalination
process is new and uses waste heat from the turbine condenser system to evaporate sea water in a vacuum.
The South Coast Steam Plant, near Ponce, has two 44,000 Kw, two 82,500 Kw steam-electric units and
a 10,000 Kw jet peaking unit. One of the outstanding features of this plant is that it can bum either low cost refinery pitch or Bunker C fuel oil. This plant currently receives its fuel by direct pipe line from the nearby refinery at the Commonwealth Oil Refining Co. To meet the increasing demand for industrial power in Southern Puerto Rico two 400,000 Kw units are being added to this plant. The San Juan Steam Plant has an installed capacity
Hydroelectric Stations There are 15 hydroelectric plants with a total installed capacity of 104,840 Kw. Eleven of these plants have reservoirs which permit regulation of plant out put by collecting and storing water inflows during the rainy season for utilization during the dry season, and the remaining four operate on run-of-the-river flows. Ten of the hydroelectric plants are non-attended and fully automatic. Bonus Nuclear Power Plant
This plant is under the process of being decommis
of 578,000 Kw in four 20,000 Kw, two 44,000 Kw and four 100,000 Kw steam-electric units and a
sioned as a result of an agreement between the Atomic Energy Commission, owners of the reactor, and the Puerto Rico Water Resources Authority.
10,000 Kw jet peaking unit.
The plant as such, because of its limited capacity
4
of 16,500 Kw, was never intended for continuous commercial operation. It was more a joint research and development project between the two agencies. As such it was a successful venture because it con
tributed to current nuclear technology and also pro vided an excellent training ground for Authority technicians who in the future may be called upon to operate large nuclear plants. The AEC's invest ment in the project reached $23.5 million whereas the Authority invested $5.6 million in land and con ventional generating equipment. Of these the AEC reimbursed the Authority $1.5 million since the actual cost exceeded the original estimate. Thus the net capital cost to the Authority stands at $3.8 mil lion after deducting depreciation. Of this amount the
cost of land represents $0.3 million.
points throughout the system to insure stability of service and provide an adequate islandwide network. The transmission system also includes a submarine cable 9.5 miles long which was placed in service during May 1963 to connect the island of Vieques to the Authority's system. Distribution facihties
include
202
substations
owned by the Authority with a capacity of 956,284/ 1,317,286 Kva which, supplied from the transmis sion network, convert the electric power for distribution at 2,400/4,160 Y, 4,800/8,320 Y and
7,620/13,200 Y volts through distribution feeders which traverse aU the Island. In addition, there are
193 privately owned distribution and interchange sub stations with a total capacity of 479,417/521,032 Kva to serve industrial customers, making a total
installed capacity of 1,435,701/1,838,318 Kva. Transmission and Distribution Systems The Authority's transmission system consists of 1,577 circuit miles of 115 Kv and 38 Kv lines, controlled
Rural Electrification
and sectionalized at 143 substations and sectionalizer
Through successive amendments to an original loan
stations, with a total name plate transformer capacity of 2,131,425/3,009,475 Kva located at suitable
tween the Authority and the Rural Electrification
El Monte — a recently completed apartment complex.
contract for $6,376,000, entered into in 1952 be
Administration of the United States, the Authority has borrowed to date $77,040,000 on bonds bearing
any lawful means, including the power of eminent domain.
now totaling $79,040,000. These funds have been loaned by REA for the construction of generation,
For many years the Authority has followed a policy of initially financing the construction of facilities under its Capital Improvement Program with short
transmission and distribution facilities to serve rural
term bank loans. From time to time, issues of revenue
interest at the rate of 2% under a loan contract
bonds are sold for the repayment of such loans and
customers.
By law, the Commonwealth Government contrib
utes to the Authority the annual amounts required to guarantee that the Authority recovers the complete cost of service to customers served under the REA
program, in the case that revenues do not provide an adequate contribution to fixed costs.
Financing System Growth Under its enabling legislation, the Authority has the power to borrow money and issue revenue bonds for its corporate purposes and to secure the payment of these bonds under a Trust Indenture. It also has full
authority to set and collect adequate rates and other charges for the use of its facilities, and has complete control and supervision over its properties and activi ties. Properties may be acquired by the Authority by
for the continuance of construction. In this way the
facilities producing income for the support of longterm obligations are to a large extent already in oper ation by the time such obligations are issued. Bonds outstanding, including the REA issues, totaled $406,142,000 as of October 31, 1968. In addition, a substantial amount of the Capital Improvement Program has been financed directly from revenues of the Authority. In the period from May 1, 1947 to October 31, 1968, a total of $638,296,000 was invested in capital improvements. Of this amount $459,627,000 has been provided from the net proceeds of bond issues and bank bor rowings, and $178,669,000 had come mainly from net revenues of and contributions to the Authority. On October 31, 1968, total net assets amounted to
GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1946
Average
Kilowatt
Revenue per
Customers
Load
Load
Hours per
Kilowatt
Revenue per
(End of Period)
(Kw)
(Kw)
Customer
Hour
Customer
Sales
Maximum
\ Fiscal Year
(June 30)
(Thousands of Dollars)
(Million Kwh)
Peak
5,764
258.6
124,959
63,000
39,000
2,069
.0223
$ 46.13
1950-51
13,006
488.2
185,090
109,000
69,000
2,638
.0266
70.27
1955-56
25,216 28,693 33,973 35,781 40,441 45,304 50,846 57,520 65,865 72,952 83,734 93,233 104,271 117,460
930.8
1,078.4 1,298.8 1,421.6 1,667.4 1,892.4 2,145.4 2,465.6 2,858.4 3,186.3 3,771.7 4,291.8 4,894.8 5,529.8
314,853 338,685 363,032 385,592 408,671 435,019 459,995 487,991 517,682 552,111 581,369 608,462 635,155 672,000
210,000 249,000 272,000 314,000 355,000 398,000 439,000 498,000 560,000 637,000 737,000 825,000 939,000 1,045,000
129,000 153,000 181,000 198,000 231,000 261,000 294,000 335,000 388,000 436,000 506,000 575,000 657,000 731,000
2,956 3,184 3,578 3,687 4,080 4,350 4,664 5,053 5,522
1945-46
1956-57 1957-58 1958-59 1959-60 1960-61 1961-62 1962-63 1963-64
1964-65 1965-66 1966-67 1967-68
1968-691
t Estimate.
$
5,771 6,488 7,053 7,706 8,229
.0271
80.08
.0266
84.72
.0262
93.58
.0252
92.79
.0243
98.96
.0239
107.34
.0237
113.44
.0233
121.20
.0230
130.85
.0229
132.13
.0222
144.03
.0217
153.23
.0213
164.17
.0212
174.79
NUMBER OF CUSTOMERS
SALES OF ELECTRICITY-KWH
Thousands
Millions of KWH
700
6,000
600
I;:;:::::-:::) Other 4.500
Industrial Commercial
4.000 Residential
Fiscal '60 Years
'SI
'62
'63
64
'65
"66
'67
"68
69*
Fiscal '60
'61
'62
'63
'64
'65
'66
'67
'68
'69
•Estimate
Source: P.R.W.R.A. Financial Reports.
$628,615,000, operating and appropriated reserves were $33,430,000, contributed capital and unap propriated net revenues were $121,058,000 and out standing debt was $442,510,000. Total revenues for the twelve months ended Oc
tober 31, 1968, were $112,511,000. Current ex
penses were $61,798,000, leaving a balance of $50,713,000 available for debt service requirements and other contractual obligations. The maximum
debt service for any future year on outstanding issues was $21,690,000, indicating a coverage of 2.36 times on present debt. Accruals for contributions to the Commonwealth and municipal governments in lieu of taxes amounted to $11,879,000 during the same period.
The rapid expansion in facilities and improvement of service over the past decade has been carried out without raising the Authority's rates. Constant in creases in demand have consistently resulted in a yearly growth in revenues and in substantial reserves
adequate to meet the Authority's operating expense and contractual obligations.
New Bond Issue
In February 1969, the Authority proposes to sell $60,000,000 par value Electric Revenue Bonds for the purpose of liquidating current bank borrowings and continuing the Capital Improvement Program. Preliminary calculations indicate that the Author ity's maximum annual debt service, upon the comple tion of the financing, will approximate $25,672,000 and will be covered about 2.00 times by net earnings for the twelve months ended November 30, 1968.
Looking Ahead Continuous studies of power needs, constantly re viewed and revised by the Authority and its consult
ing engineers, now indicate that peak demand of the system will increase from 1,045,070 Kw in 1968-69 to 1,211,760 Kw in 1969-70, 1,521,290 Kw in 1970-71 and 1,782,000 Kw in 1971-72. It is expected that over 30,000 new customers will be added yearly. To meet this demand, the Authority's generating capacity
m
Las Americas — the largest shopping center in Puerto Rico, in metropolitan San Juan, consisting of 79 stores, completely air conditioned.
will be raised to a name plate rating of 2,501,840 Kw by June 1972.
During the period from July 1, 1968 through June 30, 1972, it is anticipated that the Authority will invest $420,459,000 in further capital improvements. Of this amount, the sale of bonds will provide some $310,745,000. About $107,571,000 or 26% will be
derived principally from revenues of the Authority, compared with an average of 28% accrued from
earnings and contributions during the last twenty-one years. The remainder of $2,143,000 will be available from previous bond issues.
It will be noted that the capital improvement pro gram shows a substantial increase over the next four
years. The reason for this is that the Authority has found it necessary to increase the size of the gener ating units scheduled for 1971 and 1972 to 400 MW to serve large metallurgical processors, thus exceed ing the normal growth of the system. The Economic
Development Administration has been promoting the establishment of these plants. Since these plants are expected to be the core of industrial complexes which will foster general economic development,
the Authority under special agreements with the Commonwealth Government is willing to provide power at prices based on the incremental cost of power of the larger units. In order to make the con
struction of the larger units economically feasible
for the Authority, the Legislature of Puerto Rico approved Law #82 of 1967 which guarantees to
reimburse the Authority for any part of the annual charges on whatever portion of the extra capacity that remains unsold during the period 1971 to 1974 up to a limit of $3,250,000 during each of these four years. Such amounts would be deducted from the
contribution in lieu of taxes payable to the Common wealth Government.
The above four-year program compares with capi tal expenditures actually made during the past twentyone years, distributed as follows: steam production plant $229,405,000, nuclear production plant
$5,602,000, hydraulic production plant $36,267,000, gas turbine production plant $17,919,000, transmis sion plant $79,696,000, distribution plant $187,564,000 and other facilities $81,843,000 for a total of $638,296,000,
Security for the Bonds Bonds issued by the Authority under the Trust
Indenture are payable from the Puerto Rico Water Resources Authority Sinking Fund. The Authority
has covenanted to deposit in this fund a sufficient amount of its revenues, after expenses for main tenance and operation of its electric properties, to pay the principal of and the interest on all bonds issued as they become due, as well as to create
reserves for such purposes. The Authority has also covenanted that it will at all times fix and collect reasonable rates and charges sufficient for the payment of maintenance and oper ating expenses and bond principal and interest, and to create certain reserves. Rates must also provide for the making of deposits required by the Trust Indenture to the credit of the General Reserve Fund
and the Renewal and Replacement Fund, and for payments in lieu of taxes to the Commonwealth and the municipalities it serves. In order for the Authority to issue additional bonds under the Trust Indenture, the average annual bal
ance of revenues from its electric properties for the preceding twenty-four months, after deducting the cost of maintaining, repairing and operating these
properties during the same period, must be not less than 150 percent of maximum debt service payable in any succeeding fiscal year on all bonds, including the proposed issue. By supplemental indenture, to become effective only when all presently outstanding bonds issued prior to 1965 have been retired, this percentage will be reduced to 140. The bonds and the income therefrom are, under
provisions of Acts of Congress now in force, exempt from Federal and State taxation. These bonds are also
legal investments for savings banks and trust funds in the state of New York and for savings banks in
California and are eligible for deposit by banks in Puerto Rico to secure public funds, and by insurance companies to qualify them to do business in Puerto Rico. The bonds are rated "A" by Moody's Investors Service and by Standard and Poor's. In the credit history of Puerto Rico, its municipali ties, authorities, agencies and other political sub-
TOTAL REVENUES, BALANCE AFTER CURRENT EXPENSES,
REVENUES FROM SALES OF ELECTRICITY
AND DEBT SERVICE REQUIREMENTS Millions of Dollars
Millions of Dollars
130
120
120
Total Revenues
I
[ Balance After Current Expenses Debt Service Requirements
Residential
Fiscal
Fiscal
Years
Years
mil I I Jl '60
'61
•Estimate
'62
'63
"64
'65
Including Fuel Oil Adjustment
Source: P R.VV.R.A. Financial Reports.
â– 67
'68
Puerto Rico Water Resources Authority
Condensed Balance Sheet As of October 31, 1968
ASSETS
NET UTILITY PLANT:
Gross utility plant Less accumulated provision for depreciation
$644,934,476 113,417,592
Net utility plant
$531,516,884
OTHER PHYSICAL PROPERTY
168,370
BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS
20,012,181
CURRENT ASSETS:
Funds and working advances
$ 20,750,928
Accounts receivable — Less Reserve for uncollectible accounts
21,126,813
Materials and supplies Prepayments, special deposits, etc
19,103,930 1,920,793
62,902,464
DEFERRED DEBITS:
Debt discount and expense in process of amortization
$ 12,169,833
Other
1,845,134 TOTAL ASSETS
14,014,967 $628,614,866
LIABILITIES
CONTRIBUTED CAPITAL
$ 45,298,284
UNAPPROPRIATED NET REVENUES
75,759,366
LONG-TERM DEBT:
Electric revenue bonds Notes payable
$406,142,000 33,900,000
Lease-purchase obligation, less portion included in current liabilities . . .
2,467,676
442,509,676
$ 11,439,560 5,238,935 4,685,880 4,251,173 6,002,073
31,617,621
CURRENT LIABILITIES:
Accounts payable Customers' deposits and accrued interest Accrued interest on Electric Revenue Bonds Accrued contributions in lieu of taxes Other RESERVES:
Self-insurance Injuries and damages Revenue stabilization
Appropriated sinking fund Plant improvements TOTAL LIABILITIES 10
$
7,812,096 2,649,164 1,355,718
21,577,925 35,016
33,429,919 $628,614,866
Puerto Rico Water Resources Authority
Condensed Statements of Revenues and Expenses (For Revenue Fund Purposes per Trust Indenture) Twelve Months Ending Oct. 31 1968
June 30 1965
June 30 1966
June 30 1967
June 30 1968
$72,952,446
$83,734,015
$93,232,606
$104,270,618
$108,426,118
1,644,048
1,890,939
2,085,113
Other operating revenues Total operating revenues . . . . $74,596,494 $85,624,954 $95,317,719
2,111,965
2,198,053
$106,382,583
$110,624,171
1,182,929
1,369,968
1,420,789
1,781,295
1,886,557
$75,779,423
$86,994,922
$96,738,508
$108,163,878
$112,510,728
$10,709,138
$12,035,637
$13,671,019
$ 15,434,275
$ 14,698,538
19,894,285
22,518,518
25,011,077
28,348,610
30,599,505
9,339,608
10,717,943
11,840,030
14,263,000
15,430,612
REVENUES:
Sales of electric energy
Other income Total revenues
CURRENT EXPENSES:
Operation — Fuel
Other operating expenses Maintenance
750,520
1,045,519
1,010,175
937,572
1,069,236
$40,693,551
$46,317,617
$51,532,301
$ 58,983,457
$ 61,797,891
penses (per Trust Indenture) . . $35,085,872 $40,677,305
$45,206,207
$ 49,180,421
$ 50,712,837
Other current expenses
Total current expenses Balance of revenues after current ex
SINKING FUND PAYMENTS:
Interest account (exclusive of interest
charged to construction and reimburse ment from the Commonwealth Govern
$ 8,426,525
$ 9,061,921
$ 9,555,562
$ 11,166,209
$ 11,576,481
4,631,960 220,116
5,992,000 207,304
5,710,000
207,304
6,685,000 787,908
6,889,299 884,944
Total sinking fund payments . .
$13,278,601
$15,261,225
$15,472,866
$ 18,639,117
$ 19,350,724
Balance
$21,807,271
$25,416,080
$29,733,341
$ 30,541,304
$ 31,362,113
$
$
ment of Puerto Rico)
Bond redemption account (exclusive ot reimbursement from the Common wealth Government of Puerto Rico) Reserve account
TRANSFERS TO:
General reserve fund — provision for self824,926
909,838
12,397,814
14,617,510
12,393,200
13,671,744
5,160,000
3,516,925
3,475,968
$13,075,892
$15,348,412
$18,378,126
$ 18,098,507
$ 18,616,997
Balance available for contributions in $ 8,731,379 lieu of taxes, etc
$10,067,668
$11,355,215
$ 12,442,797
$ 12,745,116
9,172,130
10,213,261
11,423,274
11,879,259
insurance
Renewal and replacement fund . Total transfers
678,078
730,902
>
$
943,341 14,197,688
PROVISIONS FOR CONTRIBUTIONS IN 7,989,345
LIEU OF TAXES
$
742,034
$
895,538
$ 1,141,954
$
1,019,523
$
865,857
Transfer to sinking fund reserve account $ Balance transferred to unappropri
371,017
$
447,769
$
570,977
$
509,762
$
432,929
$
371,017
$
447,769
$
570,977
$
509,761
$
432,928
Balance
PROVISION FOR:
ated net revenues
11
divisions, there is no known record of default or de
and House were to be elected by the people, but the
linquency in the payment of principal of or interest on any obligation, nor has there been any forced or "managed" refunding of maturing bonds to avoid
Executive and Judicial branches remained under con
trol of Washington through appointment by the President.
No further change occurred until 1946 when the President for the first time appointed a Puerto Rican
default.
Government History
as Governor. In 1947 the Jones Act was amended to
Puerto Rico came under United States sovereignty by the Treaty of Paris on December 10, 1898. The Con
gress of the United States provided for a civil gov ernment for the Island in 1900. It provided for a
Governor, a Cabinet, a Senate and a Supreme Court Judiciary, all appointed by the President of the United States; only a House of Delegates was elected by the People of Puerto Rico.
permit Puerto Ricans to elect their own Governor, who in turn was empowered to appoint his Cabinet and members of the Supreme Court. The next advance toward complete local govern ment occurred in 1950 when, in accordance with the
wishes of the People of Puerto Rico, the 81st Con gress enacted Public Law 600, approved July 3, 1950. This law, which is "in the nature of a com
Over succeeding years strong feeling developed for
pact," became effective upon its acceptance by the
a more autonomous form of government and in favor
electorate of Puerto Rico. It provides that those sec tions of the Organic Act which define the political, economic and fiscal relationship between Puerto Rico
of United States citizenship. The original Act was superseded in 1917 by the Organic Act or Jones Act,
which granted United States citizenship to Puerto Ricans, as well as unrestricted suffrage for local pur poses. It also provided that members of both Senate
The world's largest radio-radar telescope at Arecibo, a client of
the Authority.
and the United States shall remain in full force and shall be thereafter known as the Puerto Rican
Federal Relations Act. It also authorized the People
San Juan tourist area
where many luxury hotels are located.
of Puerto Rico to draft and approve their own con stitution. The Constitution was drafted by a freely elected constitutional convention, overwhelmingly ap
proved in a special referendum and approved by Congress and the President. It became effective upon proclamation of the Governor of Puerto Rico on July 25, 1952.
of the Supreme Court of Puerto Rico may be taken to the Supreme Court of the United States, in the same manner and under the same terms and conditions as
writs of error and appeals may be taken from other Federal and State courts.
Governmental responsibilities assumed by the Commonwealth are greater than those normally as
sumed by a State government. Municipalities which combine both rural and urban areas are the only local The Commonwealth Government
The Constitution recognizes and assures a separation
of powers among the executive, legislative, and judi cial branches as in the Federal Constitution, and as in those of the States. Both the Governor and the bi
cameral legislature are subject to regular election every four years. The Legislature operates under
standard parliamentary and legislative rules. Writs of error and appeals from judgments of the District Court of the United States for Puerto Rico may be taken to the United States Court of Appeals for the
First Circuit and to the Supreme Court of the United States and writs of error and appeals from judgments
political subdivisions and are comparable to counties in scope. The only units of government with the right to levy ad valorem taxes are the Commonwealth Gov ernment and the municipalities. There is, therefore, no other overlapping taxation or bonded indebtedness payable from taxes. The Commonwealth Government assumes responsibility for a number of important functions normally performed by local govermnents in the Continental United States. Among these are
police and fire protection, education, all major street construction, and public health programs. In addi tion, the Commonwealth Government supervises
municipal fiscal affairs to a very substantial extent.
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Supervisor checking breaker status on system single line diagram at Monacillos.
Commonwealth and municipal governments are relieved of most of the responsibility for constructing and financing electric, water, and sewer systems by the Water Resources Authority and the Aqueduct
and Sewer Authority. Air and sea port facilities are administered by the Ports Authority, and major highway construction is financed by the Highway Authority. The bonded debts of these public corpora
tions, with the exception of the Highway Authority, are supported entirely by revenues derived from
their operations. Bonds issued by the Highway Authority are supported by a portion of the gasoline tax.
Political Background In 1938 a political party emerged in Puerto Rico which was to emphasize economic development to improve the welfare of the people. From 1940 until the elections in November, 1968, as the Popular Democratic Party, it was in control of the govern ment of Puerto Rico, and was instrumental in estab
lishing the present Commonwealth political relation ship.
Since 1948 there have been two major political thrusts in political life in Puerto Rico towards close association with the United States and a minor and
almost negligible one in favor of independence. The trends are illustrated in the following data on election results by parties in recent years. 1952
1956
1960
1964
1968
64.8% —
62,5% —
62.4% —
59.4% —
41.8% 10.0%
12.9% —
25.0% .—
34.3% —
34.6% —
0.2% 45.0%
3.3%
—
—
—
—
19.0% —
12.5% —
3.3% —
2.7% 3.3%
3.0% —
Commonwealth
Popular Democratic Party . . Peoples Party Statehood
Statehood Republican Party . New Progressive Party Socialist Party
Independence Party Christian Action Party
As a general comment, it is obvious that desire for close and permanent ties with the United States has become an inherent ingredient.
Governor Luis A. Ferre, a prominent and highly successful industrialist, as well as a leading philan thropist, was the candidate in 1968 of the New Progressive Party which he organized in 1967 after
leaving the Statehood Republican Party. He cam paigned on the basis of a need for change and for more effective government through new leadership. Politi-
cal status did not receive emphasis as an immediate
issues to the attention of, and to inform the voters,
issue. He received 45.0% of the vote in the recent
each recognized political party receives from the Commonwealth Treasury a contribution of funds to
election, compared with 41.8% of the vote received by the candidate of the Popular Democratic Party. In the Legislature, the New Progressive Party also gained control of the House of Representatives, although the Popular Democratic Party retained con trol of the Senate, thus definitely establishing a two party system of Government.
Three factors pertaining to elections in Puerto Rico are worthy of mention. There is strong public interest in government affairs and a high degree of voter participation in elections. In the 1968 elections, 79.3% of those registered actually voted. Second, in order to reduce pressure from special interests, Puerto Rican law limits political contribu tions from any one person or corporation to $300 in any one election year and $100 annually in other years. Yet, recognizing the need for funds to bring
carry out its political campaign. This contribution is according to a formula based primarily on the
party's percentage of votes cast in the most recent election.
And third, Puerto Rican law provides that if a
minority party receives a substantial vote, but fails to elect candidates to the Legislature, then, under certain circumstances that body is increased in size
by formula to assure minority representation. The Municipal Law (Act No. 142, approved July 21, 1960) also assures minority representation in the
Municipal Assemblies since at least three members of each of these bodies have to be elected from the minority parties. 1967 Plebiscite
In 1962 the Legislature of Puerto Rico petitioned the Congress of the United States requesting a
Partial view of San Juan Steam Plant, foreground;
plebiscite by the voters of Puerto Rico through which
port facilities and skyline, background.
an expression of preference could be demonstrated for either a continuation of the existing common
wealth relationship with the United States, or the attainment of Federated Statehood in the United States, or the establishment of Puerto Rico as an independent country.
In response to the petition, the Congress ap
proved a bill in 1964 providing for the establishment of a United States-Puerto Rico commission to study all the factors involved. The membership of this commission consisted of three persons appointed by the President of the United States, two each selected
by the Senate and the House of Representatives, and six appointed by the Governor of Puerto Rico. The Commission concluded that the people of Puerto Rico should be consulted with regard to the status they
preferred and, in December, 1966, the Puerto Rican Legislature passed an act providing for the holding of the plebiscite.
This plebiscite, held July 23, 1967, strongly re affirmed the overwhelming desire of the Puerto Rican
people to maintain permanent and close ties with the United States. Of the over 700,000 ballots cast (66.3
percent of ail registered votes) 99.4 percent were for
either Commonwealth or Statehood and only 0.6
facturing has increased to 24.5 percent. This has been
percent for Independence. A tabulation of the actual results of the plebiscite is shown below:
the result of Puerto Rico's ambitious industrialization
425,132 (60.4%) 274,312 (39.0%) 4,248 ( 0.6%)
Commonwealth Statehood
program known as "Operation Bootstrap". Manufacturing itself has been diversifying at a
rapid pace. Manufacturing net income is now de
Political stability, one of the prime requisites of a sound, attractive investment climate, is outstandingly
rived mostly from new factories promoted by the Economic Development Administration. These fac tories export most of their output to continental United States and are now responsible for the largest share of exports. While in 1950 total exports reached $235 million, only $33 million or 14.0 percent was
demonstrated in Puerto Rico. Only a declining minor
derived from new factories. This picture has changed
ity party favors independence. Both major parties hold maintenance of permanent ties with the United States as a basic principle, and differ only as to the form which that future political relationship should
$1,449 million new factories accounted for $1,012
Independence
take.
dramatically in 1968. Of total exports amounting to million or 69.8 percent. These new factories manu facture a wide range of products such as apparel, petroleum derivatives, electronic components, food products, pharmaceuticals, etc. Large, heavily capitalized manufacturing opera
Expansion and Diversification of the Economy of Puerto Rico
tions have shown a significant increase in recent years
The economy of Puerto Rico continues its outstand
as compared to those labor intensive operations
ing rate of growth. In 1968 the Gross Product of the
Commonwealth reached $3,740 million, representing a rate of increase of 11.4 percent and equivalent to almost five times the level reached in 1950.
Net income has kept pace with a level of $3,076 million in 1968. This represents a growth rate of 10.7 percent. In 1950 this same figure reached $614 mil lion. In terms of current prices, net income has
shown an average increase over the last five years of 10.0 percent compounded.
The growth of the economy has brought about a
corresponding increase in family income. The per sonal income per family in 1968 reaehed $5,178 as compared with a level of only $1,500 in 1950. This represents a growth rate of 10.7 percent for 1968.
The economic changes experienced by Puerto Rico during the last eighteen years have been ex traordinary. In a relatively short period of time the
Island has managed to shift from an agricultural to a more balanced economy, concentrating in the de velopment of a strong industrial base. Whereas in 1950 agriculture made up 24.3 percent of net in come and manufacturing 14.5 percent, the situation has now changed. For 1968 agriculture's share has declined to 6.1 percent and net income from manu
Helicopter lifting ahtminum tower for 115 KV transmission line.
Supervisor checking breaker position at Monacillos 115 KV switchyard.
Petrochemicals are of increasing importance to
promoted during the early part of the industrializa tion program. These include Union Carbide Caribe
the economy of the Commonwealth. An important
which operates a $53 million glycol plant and a $22 million plant to produce alcohol intermediates. At a
development has been the addition of a $43 million aromatic plant to Commonwealth Oil Refining Com
recent date the Company announced that it will triple
pany's $105 million refinery. Corco has invested
its investment in Pefiuelas and that with other addi
$180 million in Puerto Rico in the past ten years and
tions it will increase its investment in Puerto Rico to
the present plans call for increasing the company's investments to approximately $300 million by 1970. Construction has begun on the sixth and seventh plants in the Corco complex on Puerto Rico's south coast. A 50 percent expansion of Hercor Chemical Corporation's paraxylene plant, jointly owned by
approximately $250 million. Major additions at Penuelas are scheduled to be completed by 1970.
They will include an olefins core plant with a capacity of more than one billion pounds of ethylene a year. It will be designed to operate on both locally avail able and imported raw materials. Another wholly owned subsidiary, Union Carbide Grafito, Inc. plans to build a $40 million graphite plant in Puerto Rico which will be the most modern graphite electrode facility in the world. This facility will be operation in 1970 to serve the expanding needs of electric and furnace steelmakers in the United States and through
Grace & Co. The investment in the new facility will
out the world.
amount to approximately $47 million. The joint
Corco and Hercules Incorporated, is also under way
at the complex. The two new plants are a second aromatics facility wholly owned by Corco, which will approximately double the company's production of aromatic chemicals, and a large oxo-alcohols plant,
to be owned in equal shares by Corco and W. R.
m
Workers installing high pressure shell for the new 230,000 KW turbo-generator at Palo Seco Steam Plant.
Corco-Grace investment in the oxo-alcohols plant will exceed $30 million.
Inauguration of the $61 million Phillips Puerto Rieo Core Inc. petrochemical plant took place December 15, 1967 at the plant site near Guayama on the southeastern coast of Puerto Rico. There are
several different facilities within the Phillips com
plex, in addition to the $61 million Core plant itself. An important one is Fibers International Corpora tion's $57 million satellite plant which is estimated to
produce 40 million pounds per year of Nylon 66. The company is owned jointly by Phillips Petroleum Company and Rhone-Poulenc, S. A. The man-made harbor costing $6.8 million and the $4 million orthoxylene plant are also part of the complex. The Phillips Core facility will produce various chemicals such as benzene, cyclohexane, toulene, paraxylene and orthoxylene from a daily shipment from Vene zuela of 28,000 barrels of virgin naphtha. These chemicals, in turn, will be used to manufacture such
ing satellite facilities, will reach $600 million and will create an estimated 33,000 jobs for Puerto Ricans. Sun Oil Company plans to invest $125 million in
Puerto Rico following approval of an application for an import quota for 60,000 barrels a day of crude oil. The right of access into the continental United States for 29,500 barrels a day of petroleum products has been granted. The facilities will be built at Yabucoa on the east coast. Along with them. Sun will build an all-weather, multiple-purpose harbor estimated to cost $12 million. It will have a 55 foot deep channel and a ship-turning basin with docks able to handle vessels up to 100,000 deadweight tons. Food proeessing has also been a significant growth area in reeent years. Three rice mills and a large flour and feed mill supply an important share of Puerto Rico's requirements. Four large tuna canner ies are now in operation. The Island has become one of the leading suppliers of canned fish in the United States market. A soybean processing plant producing
materials as plastics, rubber products, nylon, deter gents, dyes, and other end or intermediary products.
cake for the growing cattle and dairy industry, and
It is estimated that total eventual investment, includ
ies was also established. A subsidiary of Libby,
oil for the domestic market and for the tuna canner
McNeill and Libby has established a plant for the canning of tomato sauce and juice produced from local crops and Standard Brands, through one of its subsidiaries, has established a plant for the manufacture of dessert preparations and baking powder.
Other sectors of the economy have also been ex
panding rapidly and a substantial amount of invest
ment has been required to keep up with this growth. The tourist industry has shown a remarkable increase. Visitors to the Island reached 911,000 in the past
Many of the plants promoted by the Economic Development Administration are branches or subsidi
fiscal year spending about $202 million. To serve this ever growing number of visitors many facilities have required expansion. As a result some of the larger
aries set up by such firms as General Electric, Con
hotels are expanding their facilities.
solidated Cigar, General Cigar, American Can, Phelps Dodge, Daystrom, Carborundum, Sprague Electric, Van Camp Sea Food, General Foods, Van Raalte, Hooker Chemical, B.V.D., Bell & Howell, Interna tional Shoe, National Cash Register, Hercules Pow
The Caribe Hilton and La Concha are both start
ing multimillion dollar expansions. The Caribe will add a 23-story annex with 221 rooms and a conven tion hall with a capacity of 1,000 persons. Construc
tion is expected to be completed by 1970. La Concha
der, Stanley Works, Pepsico, W. R. Grace, Ford Motor Co., Phillips Petroleum, Babcock and Wilcox, Cutler-Hammer, Endicott Johnson, Jonathan Logan,
is adding a 20-story building with 204 rooms, a new
Motorola, RCA and Westinghouse.
exceed $7 million. Also in San Juan, the Miramar is
Eli Lilly and Company dedicated a new $10 mil lion pharmaceutical manufacturing plant in Carolina, Puerto Rico, in August, 1968. The new plant con sists of seven buildings with a total of 210,000 square feet in which some 350 employees will produce phar maceutical products and empty gelatin capsules.
pool and a large convention size ballroom. The proj ect will start early next year. Total investment will building a smaller 84-room hotel called the Petit Miramar, on the shoreline beside the Condado Beach
Hotel. Continuing efforts to expand tourism beyond the San Juan area have also borne fruit. Associated
Federal Hotels will develop a $2.5 million resort in the hill town of Coamo. The new resort will have an
Operator checking data from the economic load dispatch computer at Monacillos transmission and distribution center.
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18-hole golf course, tennis courts, riding stables, fresh and sea water pools, an orchid garden and a private
consecutive fiscal years, I964-I968, ran at the high rate of almost 26% of gross product. It has increased
airfield. It will be ready in approximately two years.
from $111 million in 1950 to $973 million in 1968.
Airport facilities have also required expansion. Puerto Rico International Airport has inaugurated a new $3 million passenger wing, first of several
Inflowing long-term U.S. capital rose from $31 mil lion in postwar 1947 to an estimated $581 million
facilities planned in a $30 million expansion pro gram. The new wing, which includes nine passenger boarding gates, will ease traffic flow for the nearly 4,500,000 travelers who will pass through the air port this year. The Island is also making preparations for the coming of jumbo jets. The Ports Authority is adding 235,000 square feet of space to the main terminal. This will include the Island's first "jet ways" system of mobile boarding compartments. Another 8,000 foot landing strip is also being added. The Puerto Rico Ports Authority is also planning to build a second international airport, to be located in the
The Puerto Rican people have benefited in many ways from the economic expansion achieved since 1950. Life expectancy has increased from 61 years to 70 years and the death rate has declined from 10.5 per thousand to 6.1 per thousand at present. The birth rate has declined from 39.6 per thousand in 1950 to 25.9 per thousand in 1968. The people are better educated, with literacy increased from 75% to about 86%. Institutions of higher learning
southwest of Puerto Rico.
public day schools.
Underlying Puerto Rico's growing and changing economy there has been a steady expansion in invest ment. Gross fixed investment during the last five
ment has in the last three years devoted approxi mately 47% of its budget to education and health.
in 1968.
have also expanded rapidly. University and college enrollment increased from only 13,000 in 1950 to about 48,000 in 1968. At the end of fiscal year 1968 over 670,000 children were enrolled in the Island's It is significant that the Commonwealth Govern
Authority's helicopter taking off from main office building. Helicopters are u.sed to patrol transmission lines and to provide rapid transportation for Authority personnel.
L
PUERTO RICO WATER RESOURCES AUTHORITY San Juan, Puerto Rico
The Community We Serve Approximate Times
Increased or
(Decreased)
An Expanding Economy: Gross Product — $ Millions
1940
.
.
.
.
1950
1968
Over 1950
287
755
3,740
5.0
Net Income — $ Millions
225
614
3,076
5.0
Personal Income Per Family — $ . . .
611
1,500
5,178
3.5
73
319
1,715
5.4
17
51
407
8.0
312
459
3,448
7.5
2
28
186
6.6
Banks:
Debits — $ Millions
Private Savings Accounts — $ Millions Assessed Value of Taxable Property — $ Millions Income Tax Collections — $ Millions
.
A More Balanced Economic Life:
Percentage Points
Per cent of Net Income from:
Change
Manufacturing
12
14.5
24.5
Agriculture Commonwealth and Municipal Government
31
24.3
6.1
8
11.4
14.0
2.6
Trade
12
16.6
17.8
1.2
Other
37
33.2
37.6
4.4
Exports by New Factories* Sugar (Raw and Refined)
14.0
69.8
62
51.1
5.7
(45.4)
Other
38
34.9
24.4
(10.5)
10.0
(18.2)
Per Cent of Exports from:
Per Cent
A Healthier, Better Educated Population: Population
55.8
Change
1,869,000
2,211,000
2,739,000
Birth Rate — Per Thousand
39.0
39.6
25.9
(34.6)
Death Rate — Per Thousand
18.4
10.5
6.1
(42.0)
46 286,000 5,000
61 408,000 13,000
Life Expectancy — Years Public Day School Enrollment University and College Enrollment .
. . .
* Promoted by the Economic Development Administration. Does not include exports of other new factories. Source: Puerto Rico Planning Board. tMay, 1968.
70.0
670,000t 48,000
23.9
14.8 64.2 269.2
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1311 Ponce de Leon Avenue, San Juan, Puerto Rico 00908 / 45 Wall Street, New York, N. Y. 10005
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