March 1963 REPORT ON
Commonwealth of Puerto Rico
Government Development Bank for Puerto Rico San Juan, Puerto Rico
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COMMONWEALTH OF PUERTO RICO
Puerto Rico Water Resources Authority GOVERNING BOARD
Chairman: Hon. Luis Munoz Marin, Governor of the Commonwealth of Puerto Rico Vice Chairman: Hon. Francisco Lizardi, Secretary of Public Works Member: Hon. Luis Rivera Santos, Secretary of Agriculture OFFICERS
Executive Director: Rafael V. Urrutia
Asst. Executive Director — Electrical Planning, Construction and Research: Victor M. Catalog" Acting Asst. Executive Director — Electrical Planning, Construction and Research: Julio Negroni Asst. Executive Director — Power Operations: Rafael R. Ramirez Asst. Executive Director — Finance: Eduardo Lube
Asst. Executive Director — Industrial and Personnel Relations: Fernando Torrent
General Counsel: Jose Vila Ruiz
General Manager of Service and Supply: Felix Cordova Diaz Director of Production and Transmission: Carlos Sabater Acting Director of Distribution and Sales: Humberto Cordero
Director of Personnel: Juan F. Doval
Chief Engineer: Pedro Colon Pagan Controller: Jose Ismael Diaz Treasurer: Louis Roig
General Manager of Irrigation Service: Harold Toro Director of Public Relations: Hermann Munoz Director of Purchasing: Javier Cuevas Benitez Safety Officer: Rafael D. Chervoni TRUSTEE
First National City Bank, New York CONSULTING ENGINEERS
Jackson & Moreland, Inc.
AUDITORS
Arthur Andersen & Co.
BOND COUNSEL
Mitchell, Pershing, Shetterly & Mitchell
* In accordance with contracts between Brazilian, Federal and Commonwealth
agencies, Mr. Cataldo is on extended leave of absence from the Authority in order to carry out a technical assistance mission in Brazil.
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Rafael V. Urrutia, 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 pub lic service corporation and instrumentality of the Government of the Common wealth of Puerto Rico. The Authority is governed by a Board composed of the Governor of Puerto Rico, the Secretary of Public Works, and the Secretary of Agriculture. The Board appoints an Executive Director who, in turn, appoints all other officers and employees and is responsible for the management and operation of the Authority.
The origin of the Authority goes back to the operation of two government agencies which began the development of hydroelectric power in Puerto Rico — 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 the Utilization of Water Resources and ensure a growth in the supply of electricity which would be adequate for the future needs of Puerto Rico's economic development. Subsequently, during the World War 11 fuel shortage, the two large private electric utilities on the Island were taken over by the United States Government as an emergency measure and their operation entrusted to the Authority. In 1944, these systems were purchased by the Authority, the properties of the Porto Rico Railway, Light and Power Company being acquired for $10,500,000 and those of the Mayaguez Light, Power and Ice Company for $1,700,000. At a later date, the hydroelectric plants of various irrigation services were integrated into the Author ity's system.
When the Authority began operations in 1941, the Island's economy was pri marily agricultural and heavily dependent on a single crop — sugar. In the latter part of that same decade, the industrialization program for the Island was intensified through the well known "Operation Bootstrap." By 1956, for the first time in Puerto Rico's history, net income from manufacturing surpassed that from agriculture. Today over seven hundred and sixty-six new factories, established through the eco nomic development program, are in operation with a total direct employment of over 59,000. As expected, the rapid change in the basic character of the economy
At the South Coast Steam Electric Plant —
170,500 KW,a fourth unit, of 82,500 KW (far
right), is nearing completion
created a consistent and rapid rise in the demand for energy. However, the Author ity through long range planning has always been able to keep abreast of the Island's needs for electric power. The growth of the Authority during this period has been impressive, shown as of June 30, as follows;
Net Utility Plant . . $38,961,036
$90,394,259
$168,791,531
$302,541,742
Electric Revenues .
7,285,346
14,879,793
28,693,447
50,845,979
Number of Customers
132,492
195,061
338,685
459,995
In the twelve months ending December 1962, 2,295,707,080 Kwh of energy were sold to 473,482 customers producing electric revenues of $53,870,229. In the past five years the Kwh sales of the Authority increased each year at the average rate of 14 percent compounded. The 1960-61 recession barely affected Puerto Rico or the Authority. Generation requirements have risen more than fifteen times since
1941. From its inception the Authority has had to constantly build new hydro and thermo-electric plants to keep up with and anticipate the mounting demand for electric power. New generating capacity has been added almost every year following acquisition of the two private utilities in 1944. Since then total name plate rating of the Authority's generating plant has risen from 64,440 Kw in 1944 to the present capacity of 656,420 Kw. Annual capital construction programs in recent years have reached as high as $31 million. The capital construction program for 1962-63 is estimated at $31,694,000. It includes work on a fourth 82,500 Kw unit at the South Coast Steam Plant near
Ponce. This unit is scheduled for completion in August 1963. Other important projects are to continue construction of "BONUS," the 16,500 Kw nuclear power plant being built on the west coast and to begin installation of a seventh 100,000 Kw
unit at the San Juan Plant. This program also includes rural electrification projects, general transmission and distribution facilities, the acquisition of land and the con struction of buildings, and miscellaneous items. Among the transmission projects
is the laying of a 38 Kv submarine cable more than ten miles to serve the neighbor ing island of Vieques, to be completed in May 1963. When current projects are completed, total generating capacity will be 855,420 Kw. The Authority is now exceeded in size only by the City of Los Angeles Depart ment of Water and Power among all of the publicly owned integrated distributors of electric energy in the United States, according to the following tabulation as of June 30, 1961:
Net Plant Electric Revenues . . Number of Customers .
City of Los Angeles Department of Water and Power
Puerto Rico Water Resources Authority
City of Seattle Department of Lighting
$618,956,671 123,671,564 945,318
$286,428,099 45,303,522 435,019
$214,921,528 37,979,289 234,648
PRESENT ELECTRIC SYSTEM
Total installed generating capacity of the Authority at the end of December 1962 had a name plate rating of 656,420 Kw and dependable capacity of 700,460 Kw. The
physical plant presently consists of twenty-two generating stations, of which eighteen are hydroelectric and four are thermal-electric generating plants. Thermal-electric facilities now supply approximately 92 percent of electric energy generated. Fuel oil is delivered directly by pipelines from the Caribbean Refining Co. on the north coast and from the Commonwealth Oil Refining Co. on the south coast to the plants in these areas. The Authority's four thermal-electric generating stations have a total installed name plate rating of 548,500 Kw. The Palo Seco Steam Plant, located near San Juan, was placed in service in 1960 and at present has two 82,500 Kw steamelectric units. It is designed for an ultimate capacity of 1,000,000 Kw. The South Coast Steam Plant, near the city of Ponce, has two 44,000 Kw and one
PUERTO
RICO
WATER
RESOURCES
AUTHORITY
ELECTRIC SYSTEM DECEMBER
31. 1962
B** Vl£w
PALO^ SEC0_ .6S.000 SAN JUAN
_
5ABELA plants
DARCCLOHCTA
.000
OORAD O VEC*
or Tl£RRA-.
cauho 0 DEL ACUA
A-; 5.072 KVA
Avok: AviaDuC TO-3.200 ANCCLC5 • 3.072 tl AlOS *
RIO cramdeI^n
^ CAROLINA CANOVANAS
ONUS tl
R»RA»jj,to '.500
BAR R A Nouitas
A0JUNIA5
'*
toro negro"no 2 ORO NEGRO NO GAR
CCAMO
^
CARite south coast
5.750 KVA^PASTILlO
\^:^NTA ISABEL
□ STEAM plants []
STEAM plants lUndif Conitfuei.o
38 KV ELECTRIC TRANSMISSION LINES
30 KV ELECTRIC TRANSMISSION LINES (Ur«J«r ConUructoo) EXISTING 115 KV ELECTRIC TRANSMISSION LINES
O HYDRO-ELECTRIC PLANTS
115 KV ELECTRIC TRANSMISSION LINES (Undor ConHfucH
A INTERCONNECTING SUBSTATIONS
RESERVOIRS
A SUBSTATIONS
82,500 Kw steam-electric units. One of the outstanding features of this plant is that it can burn either low cost refinery pitch or Bunker C fuel oil. A fourth unit, of 82,500 Kw, is under construction and scheduled for completion in August 1963. The San Juan Steam Plant has an installed capacity of 168,000 Kw in four 20,000 Kw and two 44,000 Kw steam-electric units. The turbo-generator for a seventh unit
of 100,000 Kw has been ordered. This unit is expected to be in service by September of 1965.
The Mayaguez Steam Plant, the oldest of the four plants in service, was recently equipped with two gas turbine generators with a rated capacity of 20,000 Kw each.
The main purpose of the gas turbines is to take care of peak loads for short periods in the daytime. A 5,000 Kw steam-electric unit is held in cold standby. HYDROELECTRIC STATIONS
There are 18 hydroelectric plants with a total installed capacity of 107,920 Kw. Four hydroelectric plants operate on run of river flows, and the remaining fourteen have reservoirs which permit regulation of plant output by collecting and storing water inflows during the rainy season for utilization during the dry season. Eleven of the hydroelectric plants are non-attended and fully automatic, being operated by remote control.
NUCLEAR POWER PLANT
A nuclear power plant utilizing a new and advanced type of boiling water reactor and nuclear superheater, with a rated capacity of 16,500 Kw is being constructed on the western tip of Puerto Rico under the terms of a contract between the Author
ity and the Atomic Energy Commission. The Authority is financing the cost of the plant site and the conventional generating components at an estimated cost of $4,800,000. The AEC is investing about $13,300,000 in the construction of the nuclear reactor. This project will give the Authority the necessary experience to undertake large scale generation by means of nuclear reactors when such generation becomes economically feasible. The plant is expected to be operating by March 1964.
GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1941 Maximum Peak
Average
Kilowatt
per
Revenue
Fiscal Year
(Thousands
(Million
Sales Customers
Load
Load
Hours per
(June 30)
of Dollars)
Kwh)
(End of Period)
(Kw)
(Kw)
Customer
Kilowatt Hour
Customer
r
per
$ 3,610
139.0
100,492
18,000
9,000
1,383
$.0260
$ 35.93
1945-46 . .
5,764
258.6
124,959
63,000
39,000
2,069
.0223
46.13
1950-51 . . 1951-52 1952-53^ . 1953-54* . 1954-55* . 1955-56* . 1956-57* . 1957-58* . 1958-59* 1959-60* . 1960-61* . 1961-62* 1962-63**
13,006 14,880 16,115 17,825 19,799 25,216 28,693 33,973 35,781 40,441
488.2 565.1 625.3 699.9 774.9 930.8
185,090 195,061
109,000 122,000 140,000 155,000 178,000 210,000 249,000 272,000 314,000 355,000 398,000 439,000 510,000
69,000 77,000 87,000 97,000 109,000 129,000 153,000 181,000 198,000 231,000 261,000 294,000 340,000
2,638
.0266 .0263
70.27 76.28 76.17 78.11 80.79
1940-41 . .
.
Revenue
45,304
50,846 57,015
1,078.4 1,298.8 1,421.6 1,667.4 1,892.4 2,145.4 2,464.4
211,567
228,205 245,058 314,853 338,685 363,032 385,592 408,671 435,019 459,995 486,456
'Includes amount recovered through Fuel Oil Adjustment Clause. Estimate including Fuel Oil Adjustment Clause.
2,897 2,955
3,067 3,162 2,956 3,184 3,578
3,687 4,080 4,484 4,787 5,187
.0258 .0255 .0255 .0271
80.08
.0266
84.72
.0262 .0252 .0243 .0239 .0237
93.58 92.79 98.96 107.34 113.44 120.01
.0231
^
Aerial view of
^
Monacillos Transmission Center
2
I
with Rio Piedras distribution
facilities, just iitaugurated,
^ in the background
mm
TRANSMISSION AND DISTRIBUTION SYSTEMS
The Authority's transmission system consists of 1,238 structure miles of 115 Kv and 38 Kv lines, controlled and sectionalized at 100 transmission substations, with a
total name plate capacity of 1,278,750 Kva located at suitable points throughout the system to insure stability of service and provide an appropriate islandwide net work from which power is supplied to serve the entire Commonwealth of Puerto Rico.
Distribution facilities include 11,982 structure miles of lines and 176 substations
owned by the Authority with a capacity of 508,591 Kva, which, supplied from the transmission network, convert the electric power for distribution at 2400/4160Y and 4800/8320Y volts through distribution feeders which traverse 75 cities and
towns and most of the rural area. In addition, there are 107 privately owned distri bution substations with a total capacity of 202,632 Kva to serve industrial customers making a total installed capacity of 711,223 Kva. RURAL ELECTRIFICATION
Through successive amendments to an original loan contract for $6.4 million, entered into in 1952 between the Authority and the Rural Electrification Admin
istration of the United States, the Authority has borrowed to date $58,025,000 on
bonds bearing interest at the rate of 2%, including a $3,700,000 issue placed on January 31, 1963, under a loan contract now totaling $58,450,000. These funds have been loaned by REA for the construction of generation, transmission and distribution facilities to serve rural customers. More than 93,000 rural families are now being served under this program.
By law, the Commonwealth Government contributes 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, where revenues do not cover expenses.
FINANCING THE PROGRAM
The Authority has broad powers under the legislation by which it was created, including the power to borrow money and issue revenue bonds for any of its
PUERTO RICO WATER RESOURCES AUTHORITY
MILLIONS OF DOLLARS 58
REVENUES FROM SALES OF ELECTRICITY
56
RESIDENTIAL TOTAL
I III III III III â– 11 FISCAL
1948
1949
1950
1951
1952
1953
1954
1955
Âť 11 11 1956
1957
1958
1959
1960
1961
1962
1963*
* Eslimatod Including Fuel Oil Adjustment Clouse. Source: P.R.W.R^. Financial Reports.
corporate purposes and to secure the payment of such bonds under a Trust Inden
ture. It has full authority to set and collect adequate rates and other charges for the use of its facilities, as well as having complete control and supervision over
its properties and activities. Properties may be acquired by the Authority by any lawful means, including the power of eminent domain.
For many years the Authority has pursued a policy of obtaining short-term bank loans for the purpose of constructing facilities under its Capital Improvement Program; from time to time, issues of revenue bonds are sold for the repayment of such loans and for the continuance of construction. In this way the facilities producing income for the support of long-term obligations are to a large extent already in operation by the time such obligations are issued. Bonds outstanding, including the REA issues, totaled $257,974,000 as of December 31, 1962.
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 December 31, 1962, a total of $331,541,600 was invested in capital improvements; of this amount $257,518,214 had been provided from bank borrowings and the
proceeds of bond issues, and $74,023,386 or about 22 percent, had come mainly from net revenues of and contributions to the Authority. On December 31, 1962, total net assets amounted to $370,288,884, operating and appropriated reserves were $19,855,858, contributed capital and unappropriated earnings were $64,421,879, and outstanding debt was $266,674,000.
Total revenues for the twelve months ended December 31, 1962 were $55,988,-
810. Current expenses were $29,578,045 leaving $26,410,765 to meet debt service requirements. The maximum debt service for any future year on outstanding issues was $12,600,903, indicating a coverage of 2.11 times on present debt. Payments to
the Commonwealth and municipal governments in lieu of taxes amounted to $5,563,099 in the fiscal year 1961-62. During the rapid expansion of facilities and improvement of service over the past decade, the Authority's rates have not been raised. Constant increases in demand have consistently resulted in yearly growth in revenues and in substantial reserves, adequate to meet the Authority's operating expenses and contractual obligations.
In March 1963, the Authority will sell $15,000,000 par value Electric Revenue Bonds, from which $13,200,000 of current bank borrowings will be retired and about $1,800,000 made available for new construction. LOOKING AHEAD
Continuous studies of power needs, constantly reviewed and revised by the Authority and its consulting engineers, now indicate that peak demand on the system will increase from 510,000 Kw in 1962-63 to 590,000 Kw in 1963-64, 676,000 Kw in 1964-65 and 775,000 Kw in 1965-66. It is expected that over 20,000 new customers
will be added yearly. To meet this demand, the projected name plate rating generat ing capacity of the Authority will be raised to 855,420 Kw by June 1966. During the period from July 1, 1962 through June 30, 1966, it is anticipated that
the Authority will invest $123,000,000 in further capital improvements. Of this amount, the sale of bonds will provide some $73,300,000. About $43,900,000 or 36% will be derived principally from revenues of the Authority, compared with an average of 21.9% accrued from earnings and contributions during the last fifteen years. The remainder of $5,800,000 will be available from previous bond issues. The above four-year program compares with capital expenditures actually made during the past sixteen years, which are distributed as follows: Steam Production Plant
$121,693,793
Hydraulic Production Plant
35,997,651
Gas Production Plant Transmission Plant Distribution Plant Other Facilities
8,144,095 46,362,858 91,034,290 28,308,913
Total
$331,541,600
SECURITY FOR THE BONDS
Bonds issued by the Authority under the Trust Indenture are payable from the Puerto Rico Water Resources Authority Sinking Fund, into which fund the Authority has covenanted to deposit a sufficient amount of its revenues, after expenses for maintenance 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 BONUS- 16.500 A'tF Nuclear Electric Plant at Rincon is expected to
undergo preliminary testing
by the end of 1963
PUERTO RICO WATER RESOURCES AUTHORITY
CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1962
ASSETS NET UTILITY PLANT:
Gross utility plant Less provision for accumulated depreciation
$364,730,204 51,806,949
Net utility plant
$312,923,255
OTHER PHYSICAL PROPERTY
1,150,238
BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS
13,450,638
CURRENT ASSETS:
Funds and working advances Accounts receivable — Less Reserve for uncollectible accounts. Materials and supplies
$ 13,806,323 9,704,536
7,475,474 4,118,822
Prepayments, special deposits and other
35,105,155
DEFERRED DEBITS:
Debt discount and expense in process of amortization
7,147,131
Other.
512,467
TOTAL ASSETS
7,659,598
$370,288,884
LIABILITIES
CONTRIBUTED CAPITAL
$ 32,454,565
UNAPPROPRIATED NET REVENUES
31,967,314
LONG-TERM DEBT: Electric revenue bonds
$257,974,000
Notes payable
8,700,000
266,674,000
CURRENT LIABILITIES:
Accounts payable Customers' deposits and accrued interest . Accrued interest on Electric Revenue Bonds Accrued contributions in lieu of taxes . . Other
$
5,882,669 2,140,775 4,222,444 3,086,496 3,441,892
DEFERRED CREDITS
18,774,276 562,871
RESERVES: Self-insurance
Hydro-production equalization . Injuries and damages Revenue stabilization
Appropriated sinking fund TOTAL LIABILITIES
a
3,461,792 1,021,258 764,207 1,011,347 13,597,254
19,855,858
$370,288,884
PUERTO RICO WATER RESOURCES AUTHORITY
CONDENSED STATEMENTS OF REVENUES AND EXPENSES (For Revenue Fund Purposes per Trust Indenture)
TWELVE MONTHS ENDING December 31 1962
June 30 1959
June 30 1960
June 30 1961
June 30
Sales of electric energy . . . Other operating revenue . .
$35,780,765 811,338
$40,440,678
$45,303,522 1,110,660
$50,845,979
994,844
1,284,837
$53,870,229 1,350,306
Total operating revenues
$36,592,103 363,432
$41,435,522
$46,414,182
$52,130,816
$55,220,535
638,016
731,477
675,433
768,275
$36,955,535
$42,073,538
$47,145,659
$52,806,249
$55,988,810
$ 5,851,898
$ 6,364,024
$ 6,885,447
$ 7,360,603
12,135,940 3,913,749 423,207
13,381,840 4,495,076 511,245
14,104,870 6,104,009 529,768
$ 7,705,444 14,786,315
Other current expenses . .
10,755,756 4,165,602 351,265
Total current expenses
$21,124,521
$22,836,920
$25,273,608
$28,099,250
$29,578,045
$15,831,014
$19,236,618
$21,872,051
$24,706,999
$26,410,765
$ 4,764,979
$ 5,226,952
$ 6,024,656
$ 6,867,883
$ 7,228,513
2,101,488 651,812
2,549,700 856,675
2,930,621 1,003,767
3,373,776 1,179,206
3,576,638 1,259,534
Total sinking fund payments
$ 7,518,279
$ 8,633,327
$ 9,959,044
$11,420,865
$12,064,685
Balance
$ 8,312,735
$10,603,291
$11,913,007
$13,286,134
$14,346,080
$
$
$
$
$
REVENUES:
Other income
Total revenues
. . . .
1962
CURRENT EXPENSES:
Operation — Fuel
Other operating expenses Maintenance
6,562,114 524,172
Balance of revenues after current
expenses (per Trust Indenture) SINKING FUND PAYMENTS:
Interest account (exclusive of interest
charged to construction and reim bursement from the Commonwealth
Government of Puerto Rico) . . .
Bond redemption account (exclusive of reimbursement from the Common
wealth Government of Puerto Rico) Reserve account
TRANSFERS TO:
General reserve fund — provision for 367,316
397,119
4,399,653
4,831,232
479,696 6,008,704
Total transfers
$ 4,766,969
$ 5,228,351
Balance available for contribution in lieu of taxes, etc
$ 3,545,766
$ 5,374,940
3,919,491
4,429,208
self-insurance
Renewal and replacement fund
PROVISION FOR CONTRIBUTION IN LIEU OF TAXES Balance
($
542,178
576,631
6,882,337
7,367,614
$ 6,488,400
$ 7,424,515
$ 7,944,245
$ 5,424,607
$ 5,861,619
$ 6,401,835
4,957,439
5,563,099
5,896,061
373,725) $
945,732
$
467,168
$
298,520
$
505,774
$
472,866
$
233,584
$
149,260
$
252,887
PROVISION FOR:
Transfer to sinking fund reserve account Revenue stabilization Total
$
373,725
$
373,725
$
472,866
$
233,584
$
149,260
$
252,887
$
—
$
472,866
$
233,584
$
149,260
$
252,887
—
—
—
—
Balance transferred to unappro
priated net revenues (
)Denotes credit. s
BONDED DEBT NOW OUTSTANDING GENERAL MARKET ISSUES Amount
Coupon by Maturity Range Original Issue
Dated
Int. Rate
$50,000,000
Jan. 1, 1947
2.75% 2.50% 2.70%
Jan. 1 Jan. 1
25,000,000
July 1, 1950
2.75% 2.80%
Outstanding
First Call Amount
Date
Price
1963-July 1, 1965 1966-July 1, 1973 Jan. 1 1974-July 1, 1977
$ 5,235,000 16,087,000 9,358,000
Jan. 1, 1950
104%
$ 30,680,000
Jan. 1 Jan. 1
1963-July 1, 1980 1981-July 1, 1984
10,749,000 10,425,000
July 1, 1953
104%
21,174,000
720,000 2,490,000 8,850,000
From
To
Dec. 31, 1962
12,500,000
Jan. 1, 1955
3.00% 3.25% 33/8%
Jan. 1 Jan. 1 Jan. 1
1963-July 1, 1969 1970-July 1, 1982 1983-July 1, 1990
Jan. 1, 1960
103%
12,060,000
22,000,000
July 1, 1956
3.25% 3.50% 3.60% 3.70% 3.75%
July July July July July July
1 1 1 1 1 1
1963-July 1966-July 1971-July 1976-July 1982-July 1990-July
1, 1965 1, 1970 1, 1975 1, 1981 1, 1989 1, 1993
245,000 485,000 560,000 975,000 1,845,000 17,555,000
July 1, 1961
3.40%
104%
21,665,000
25,000,000
Jan. 1, 1958
5.00% 3.50% 3.75% 3.90% 4.00% 4.10%
Jan. Jan. Jan. Jan. Jan. Jan.
1 1 ] ] ]
1963-Jan. 1966-Jan. 1970-Jan. 1976-Jan. 1980-Jan. 1986-Jan.
1, 1, 1, 1, 1, 1,
1965 1969 1975 1979 1985 1995
505,000 760,000 1,410,000 I,150,000 2,120,000 18,585,000
Jan. 1, 1965 104%
24,530,000
20,000,000
Jan. 1, 1959
5.00%
Jan. 1 Jan. ] Jan. ] Jan. â– Jan.
1963-Jan. 1967-Jan. 1970-Jan. 1984-Jan. 1991-Jan.
1, 1, 1, 1, 1,
1966 1969 1983 1990 1996
515,000 450,000 3,030,000 2,320,000 13,470,000
July 1, 1965 104%
19,785,000
5.00% 4.00% 4.10% 4.20% 4.30% 43/8%
Jan. ; Jan. : Jan. Jan. ; Jan. Jan.
1963-Jan. 1966-Jan. 1978-Jan. 1984-Jan. 1990-Jan. 1996-Jan.
1, 1, 1, 1, 1, 1,
1965 1977 1983 1989 1995 1997
350,000 1,985,000 1,460,000 1,860,000 2,415,000 II,650,000
July 1, 1966
104%
5.00% 3.75% 4.00%
Jan. Jan. Jan.
1963-Jan. 1, 1967 1968-Jan. 1, 1972 1973-Jan. 1, 1998
675,000 850,000 20,475,000
Jan. 1, 1967
104%
5.00% 3.00% 3.25% 3.40% 3.00%
Jan. Jan.
1964-Jan. 1970-Jan. 1976-Jan. 1987-Jan.
3.75% 4.00% 4.10% 4.20%
20,000,000
Jan. 1, 1960
22,000,000
Jan. 1, 1961
12,500,000
22,000,000
Jan. 1, 1962
July 1, 1962
3.25% 3.50% 3.60% 3.70%
Jan. : Jan. Jan.
5,580,000
1977 1982 1985 1988
4,700,000 2,995,000 5,810,000 8,495,000
750,000
1, 1, 1, 1,
22,000,000
1,145,000 1,435,000 3,590,000
1969 1975 1986 1997
1998
1964-Jan. 1978-Jan. 1983-Jan. 1986-Jan.
Jan. Jan. Jan. Jan.
1, 1, 1, 1,
19,720,000
July 1, 1967 104%
12,500,000
Jan. 1, 1968
22,000,000
104%
Total General Market Issues
$206,114,000
RURAL ELECTRIFICATION ADMINISTRATION ISSUES July July 2,000,000 July 2,000.000 July 2,400.000 July 2.500.000 July 9.200,000 July 2,800.000 July
$ 1,000,000 2,000,000
2.400.000
1, 1952 1, 1953 1, 1954 1, 1955 1, 1956 1, 1957 1, 1957
2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
1958
2.00% 2.00% 2.00%
July 1, 1958
2,500,000
July 1, 1959
17.200.000
Jan. 1, 1960
4,250,000 4,075,000
July 1, 1960 July 1, 1961
2.00% 2.00%
2.00%
Jan. Jan. Jan. Jan. Jan. Jan. Jan. Jan.
1, 1, 1, 1, 1, 1, 1,
1,
Jan. 1,
Jan. 1,
1963-July 1963-July 1963-July 1963-July 1963-July 1963-July 1963-July 1963-July 1963-July 1963-July
1, 1, 1, 1, 1, I, 1, 1, 1, 1,
1987 1988 1989 1990 1991 1992 1992 1993 1993 1994
Any time
$
816,000 1,680,000 1,728,000 1,776,000 2,192,000 2,338,000 8,590,000 2,660,000 2,295,000 2,440,000 17,020,000 4,250,000 4,075,000
Jan. 1, 1963-Jan. 1, 1995 Jan. 1, 1963-July 1, 1995 Jan. 1, 1964-July 1, 1996
Total R.E.A. Issues
Total Outstanding
no
100%
51^60^ $257,974,000
I Palo Seco Steam Electric Plant B
The Authority further covenants that it will at all times fix and collect reasonable rates and charges sufficient for the payment of maintenance and operating expenses
and bond principal and interest, and to create certain reserves. In addition the rates
must 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 pay ments in lieu of taxes to the Commonwealth and the municipalities it serves. In order to issue additional bonds under the Trust Indenture, the Authority must
demonstrate that the average annual net revenues of its electric properties for the preceding twenty-four months, after deducting the cost of maintaining, repairing and operating such properties during such period, have been not less than 150 percent of
maximum debt service payable in any succeeding fiscal year on all bonds including the proposed issue. The bonds and income therefrom are, under provisions of Acts of Congress now
in force, exempt from Federal and State income taxation. Such bonds are also legal investments for Savings Banks and Trust Funds in the State of New York and 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 Investment Service and Standard and Poor's.
There has never been any delay in payment of or default on the obligations of the Authority when due nor in those of the Commonwealth, its municipalities and agencies. THE COMMONWEALTH OF PUERTO RICO
Puerto Rico is the fourth largest of the islands in the Caribbean area. It is about 100 miles long and 35 miles wide, having an area of 3,423 square miles and a population estimated at 2,455,000 as of June 30, 1962. The topography is char
acterized by a fertile coastal plain rising to interior mountains which run mostly from east to west. San Juan, Capital of Puerto Rico, lies some 1,690 miles southeast of New York, 3V2 hours by jet plane, and 1,000 miles southeast of Miami, IVi hours by jet plane.
Under its compact with the United States, the Commonwealth of Puerto Rico exercises virtually the same control over its internal affairs, following the same
general procedures, as do the fifty federated States over theirs. It differs from the
States primarily in its relationship to the Federal Government. In brief, residents of
San Jiian — 165,000 KW
Puerto Rico do not vote in the national elections. They are represented in Congress by a Resident Commissioner who has a voice but no vote in the House of Represent atives. On the other hand, Federal taxes do not apply in Puerto Rico except by mutual consent, as is the case with social security taxes and unemployment insur ance. No Federal income tax is collected from Puerto Rican residents on income
earned in Puerto Rico, and Federal excise taxes collected on exported Puerto Rican products, such as rum and tobacco, are returned to the Commonwealth Treasury. This relationship with the Federal Government is defined through the medium of the compact entered into by Congress and the People of Puerto Rico, and is further described hereafter.
GOVERNMENT HISTORY
Puerto Rico came under United States sovereignty by the Treaty of Paris on
December 10, 1898. The Congress of the United States provided for a civil govern ment for the Island in 1900. At that time provision was made 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.
Over succeeding years strong feeling developed for a less colonial form of
government and in favor of United States citizenship. As a result, the original law 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. Both Senate and House were elected by the people, but the Executive and
Judicial branches remained under control of Washington through appointment by the President.
No further change occurred until 1946 when the President for the first time appointed a Puerto Rican as Governor. In 1947 the Jones Act was amended to 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 government occurred in 1950 when
in accordance with the wishes of the People of Puerto Rico, the 81st Congress enacted Public Law 600, approved July 3, 1950. This law, which is "in the nature of a compact," became effective upon its acceptance by the electorate of Puerto Rico. It provides that those sections of the Organic Act which define the political economic and fiscal relationship between Puerto Rico 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 of Puerto Rico to draft and approve their own constitution. The Constitution was drafted by a freely elected constitu-
1311i §:3li # Monacillos Transmission Center
Control Rooitt System Operation Shift Supervisor at work
!•••■ pi«-
PUERTO RICO WATER RESOURCES AUTHORITY
TOTAL REVENUES, BALANCE AVAILABLE DEBT SERVICING AND DEBT SERVICE REQUIREMENTS DOLLARS
60.000,000
55,000.000
50,000,000
45,000,000
40,000,000 TOTAL REVENUES
35,000,000
BALANCE AFTER
CURRENT EXPENSES DEBT SERVICE
30,000,000
REQUIREMENT
25,000,000
20,000.000
15,000,000
10,000,000
5,000,000
FISCAL YEARS
1957
1958
1959
1960
1961
1962
1963*
* Eslimaled Including Fuel Oil Adjustment Clause. Source: P.R.W.R.A. Financial Reports.
tional convention, overwhelmingly approved in a special referendum, and approved by Congress and the President. It became effective upon proclamation by the Governor of Puerto Rico on July 25, 1952. THE COMMONWEALTH GOVERNMENT
The Constitution recognizes and assures a separation of powers among the execu tive, legislative, and judicial branches as in the Federal Constitution, and in those of the States. Both the Governor and the bicameral legislature are subject to
regular election every four years. The Legislature operates under standard parlia mentary and legislative rules. The judicial system, administered by a Supreme Court appointed for life, is composed of lower and intermediate courts. 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 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 con ditions 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 assumed by a State government. Municipalities which combine both rural and urban areas are the only local political subdivisions and are com parable to counties in scope. The only units of government with the right to levy ad valorem taxes are the Commonwealth Government and the municipalities. There is, therefore, no other overlapping taxation or bonded indebtedness payable from taxes. The Commonwealth Government assumes responsibility for a number 1)3
of important functions usually performed by local governments in the continental United States. Among these are police and fire protection, education, all major street and highway construction, and public health programs. In addition, the Commonwealth Government supervises municipal fiscal affairs to a very substan tial extent.
Commonwealth and municipal governments are relieved of most of the respon sibility 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. The bonded debt of these public corporations is supported entirely by revenues derived from their operations. election procedures
Elections are held every four years on the same day as the national elections, and
provide for selection of the Governor, the Resident Commissioner in Washington, members of the Senate and House in the Commonwealth Legislature, and local municipal officials.
In the elections in November, 1960, four parties had qualified for the ballot.
The Popular Democratic Party, which originated and supports the Commonwealth status, and which believes that, from an economic point of view, and for the best interests of both Puerto Rico and the rest of the United States, any other status would be unrealistic for many years, received over 58% of the vote. The Statehood Republican Party, which favors the early attainment of Federated Statehood and the establishment of Puerto Rico as the 51st State, received 32% of the vote. Two minority parties together polled less than 10% of the total vote. The Christian Action Party, formed in 1960, secured less than 7% of the vote.
The Independence Party, favoring an independent republic, reached its peak in 1952 with 20% of the vote, and has since declined to 3% in 1960. With each of these latter two minority parties having received less than 10%
of the vote, neither will now appear on the 1964 ballot, without first qualifying
new signatures equal to at least 10% of the total vote cast in 1960. Political stability, one of the prime requisites of a sound, attractive investment climate, is outstandingly demonstrated in Puerto Rico. Only a declining, and now
insignificant, minority party favors independence. Both major parties hold mainte nance of permanent ties with the United States as a basic principle, and differ only as to the form which that future political relationship should take. PROSPECTIVE PL-EBISCITE
Ever since Puerto Rico adopted its present Commonwealth status, there have been talks on possible ways to expand this new political form. No significant changes were made until 1961 when through direct vote by Puerto Ricans and approval by Congress, the U. S. Congress transferred control of the Common wealth debt limit to the Puerto Rican Constitution and authorized appeal of deci sions of the Supreme Court of Puerto Rico directly to the U. S. Supreme Court. On the 10th Anniversary of the Commonwealth, July 25, 1962, the Governor announced that measures would be taken for a plebiscite in which the people might
express their preference for an expanded Commonwealth, still on permanent association with the United States, and the classical forms of statehood and inde
pendence. The Legislature of Puerto Rico by almost unanimous vote adopted a resolution petitioning Congress to provide the basis for such plebiscite. This desire 94
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to improve the political relationship has been spurred by the social and economic transformation of Puerto Rico during the last 10 years.
As of this date, no bill as yet has been introduced on this subject in the U. S. Congress.
GENERAL
The Capital of Puerto Rico is the city of San Juan, located on an excellent natural harbor in the northeastern section and served by a modern airport which handled
nearly 1,870,000 passengers and over 31,000 tons of air freight in fiscal year 1962. Industrial development has advanced rapidly in the San Juan metropolitan area which includes several cities adjoining the Capital and has a population of about 650,000. San Juan is also the site of the University of Puerto Rico and the center of Commonwealth and Federal Government offices.
On the south coast the principal city is Ponce, noted particularly for the pro duction of sugar products, cement and rum. West of Ponce are important chem ical and oil refinery operations. In 1959 Union Carbide began operating a new plant near Ponce, marking the trend toward growing heavy industry concentration in the South.
Other leading cities include Mayaguez on the west coast, and Arecibo on the north, both important for food processing and apparel production. Ramey Air Force Base, the most important air defense installation of the United States in the Caribbean, is located near the city of Aguadilla, also on the west coast. Economic growth in Puerto Rico since 1940 has been very rapid. Net income of the economy has increased from a level of $225 million in 1940 to $1,650
million in 1962. Output of the economy, measured in terms of gross product adjusted for price changes, has shown an average increase of about 5.8% com pounded annually. The Commonwealth Government's program of industrialization has aided the economy to shift from a lopsided dependence on agriculture in general, and sugar
in particular, to a high degree of diversification within industry and agriculture. Concurrently with the expansion in net agricultural income from $70 million in 1940 to $208 million in 1962, manufacturing income increased from $27 million
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LM PHliH ~
Main Office Building, San Juan
to $381 million, substantially surpassing agriculture as a source of income. Puerto Rican manufacturing has been increasingly diversified during the last two decades. In 1940 sugar products accounted for 35% of manufacturing income.
By 1962, about 8 percent of manufacturing income resulted from this industry. Manufacturing income is now generally derived from the production of new types of commodities, principally for shipment to the United States. Such shipments amounted to only $20 million in 1948. By 1962 they had reached a total of about $494 million.
These new products were manufactured in over 766 modern plants as of December 196"^ and cover a wide range, such as apparel, petroleum and electronic
products Large, heavily capitalized manufacturing operations have shown a sig nificant increase in recent years as compared to those labor-intensive operations promoted during the early part of the industrialization pro^am. These include
a $28 million -lycol plant built by Union Carbide & Chemical Corp. and petroleum refineries whieh are operated by Commonwealth Oil Refining Co. and Caribbean Refining Co A second rice mill was recently inaugurated, jo.mng a $5 million
Lr and feed mill In processing an important share of Puerto R.eo s food requlre-
Tnts Two large tuna canneries now in operation plua two more under construcHon will make the island one of the leading suppliers of canned hsh ,n the United Further many of the plants are branches or subsidiaries of such firms as General Electric Consolidated Cigar Corporation, Sunbeam Corporation, American Can romnanv Phelps Dodge Corporation, Sperry Rand Corporation, Carborundum Torn So'rague Electric, Van Camp Sea Food, Van Raalte, B.V.D. Corp., and International Paper Company, Ltd. Underlying Puerto Rico's growing and changing economy there has been a steady expansion in investment. Gross fixed investment during the six consecutive fiscal years 1957 to 1962 ran at the high rate of 22% of gross product. Inflowing long term U. S. capital rose from $31 million in postwar 1947 to an estimated $261 million in 1962 when it equalled 59% of the $443 million fixed investment regis tered in that year.
A statistical summary of the economic growth and the creation of a better balance in the economy during the past two decades is presented in the table following.
PUERTO RICO WATER RESOURCES AUTHORITY San Juan, Puerto Rico
The Community We Serve Fiscal Years
An Expanding Economy:
1940
1962(1)
% of Increase
Net Income — Millions of Dollars
225.3
1,650.2
632
Net Income Per Capita — Dollars
121.0
682.0
464
Gross Product — Millions of Dollars
286.7
1,985.4
593
92.7
832.7
798
17.6
270.9
1,439
311.8
1,982.0
536
1,061 1,448
Commercial Banks: Total Bank Assets — Millions of Dollars
Savings and Time Accounts — Millions of Dollars
Assessed Value of Taxable Property — Millions of Dollars Recurrent Revenues of the Commonwealth Government — Millions of Dollars'-'
26.3
305.3
166.0
2,570.7
1,869,000
2,455,000
39.0
30.2
23*
Death Rate — Per Thousand
18.2
6.6
64*
Life Expectancy — Years
46.0
70.0
46
286,113
589,458 29,900
106
Power Generation — Millions of KWH
A Healthier, Better Educated Population:
Population Birth Rate — Per Thousand
Public Day School Enrollment University and College Enrollment
4,987
A More Balanced Economic Life:
31
500
Percentage Points
Percent(%) of Net Income from:
Change
Manufacturing Agriculture Commonwealth and Municipal Government
12.0
23.0
11
31.0
13.0
18*
9.0
13.0
4
Trade
12.0
16.0
4
Other
36.0
35.0
1*
Percent(% ) of Export Trade: Sugar — Raw and Refined Other Exports
62.0
15.0
47*
38.0
85.0
47
''' Preliminary figures prepared by the Puerto Rico Planning Board. Includes Federal Grants in Aid. " Decrease.
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