Judge grants administrative expense claim for PREPA payments to Genera

By THE STAR STAFF

U.S. District Court Judge Laura Taylor Swain, who is overseeing the Puerto Rico Electric Power Authority’s (PREPA) bankruptcy case, has granted an “administrative expense claim” for the compensation paid to Genera PR, the private operator of the utility’s power plants.

The decision comes in anticipation of the effective date of the transition of PREPA employees who receive and accept employment offers from Genera PR.

An administrative expense claim is one incurred with bankruptcy court approval for the actual and necessary costs of preserving the estate, after the filing of an order for relief. After the payment of secured claims, administrative claims are entitled to the highest priority in distribution of the assets of the estate.

The court had previously also authorized an administrative expense status to LUMA Energy, the private operator of PREPA’s transmission and distribution system.

In authorizing the petition last week, Swain said in an order that the mobilization obligations, to the extent incurred and payable under the generation contract during the mobilization period, meet all applicable requirements to be allowed and paid as administrative expenses under the Bankruptcy Code and therefore are accorded payment priority.

She also noted that the Financial Oversight and Management Board consented to the allowance of the mobilization obligations as administrative expense claims and that PREPA provided adequate and appropriate notice of the motion.

It is unclear whether the priority status of the claim will have an impact on the debt adjustment plan.

The oversight board is currently in the process of developing and approving a revised fiscal year (FY) 2023 budget for PREPA.

The revisions to the FY 2023 certified budget for PREPA are solely and exclusively to enable and allow for payment of up to $15 million for the mobilization service fee under the Genera PR contract, and up to $27.3 million in estimated costs for the implementation of the voluntary transition program for PREPA employees transitioning to Genera PR.

The budget process begins today, March 13, when Gov. Pedro Pierluisi Urrutia submits a proposed revised FY 2023 budget for PREPA and will end on March 24, when the oversight board expects to certify the revised FY 2023 budget for PREPA.

Back on Jan. 25, the Puerto Rico Public-Private Partnership Authority announced the signing of the management contract with Genera PR, a subsidiary of New Fortress Energy, to operate PREPA’s legacy power plants.