Many of Prepa’s bondholders also seemed to endorse the plan, with a major caveat. “We believe the American citizens that live in Puerto Rico would be better served by an electric utility run by a private operator with a proven track record,” said the PREPA Bondholder Group in a statement. But the group also stressed that such a plan must “[respect] property rights”—in other words, Prepa’s creditors still want their due.
The initial harmony between these three groups will be tested during what promises to be a politically fraught time. First, Rosselló plans to push for legislation to be passed in through the Legislative Assembly of Puerto Rico that would allow for the sale of Prepa. Then—in a process likely to involve plenty of oversight from the FOMB—the second phase of privatization will involve bids and proposals from companies seeking a piece of Prepa. The third phase would be implementation. Rosselló expects the process to take 18 months. Moody’s credit rating agency said the timeframe “appears quite aggressive” in a statement Tuesday.
According to John Mudd, an expert in Puerto Rican law, the process will roughly resemble the federally-assisted 2009 Chapter 11 reorganization of Chrysler, where revenue-generating pieces of the automaker were packaged off and resold to Fiat, and bondholders—including a number of pension plans—agreeing to receive a fraction of the value of the assets they had liens against. “They probably won’t sell the whole thing to one party,” Mudd told me. “They’ll probably sell pieces of it to multiple parties.” Still, there’s been no negotiation yet with bondholder groups and Rosselló still owes a big chunk of change to government employees and their pension plans, and also the large group of Prepa employees who’ve left during the crisis. “It’s questionable how much money the government will get out of it,” Mudd says.
Still, regardless of the form privatization takes, the end-result will be the functional end of a public sector that has defined life in Puerto Rico for the majority of the island’s history as a United States territory. Since its creation in 1941, Prepa has been part of the economic bedrock of the island, augmenting its public sector and providing many of the jobs that controlled some of the demographic erosion to the mainland. Even with Prepa’s mounting failures over the years, mass privatization of it and other formerly public-sector arenas on the island will further reduce the input of, and regulation by, Puerto Ricans over Puerto Rican issues, after a few years when the federal government has wielded even more power on the island and attempts by its citizens at exercising sovereignty have largely been brushed aside.
Among the most vehement opponents of privatization is Ángel Figueroa Jaramillo, president of the union of Prepa employees (Utier). “PREPA is a public good that belongs to the people and not to the politicians of the day. Energy is a human right and not a commodity,” he said in a press conference in Spanish on Tuesday. While Utier is not currently planning to strike, Figeuroa said the union will engage in an island-wide outreach and activism effort.