Defendants Exhibit 1 

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ANNOTATED EXCERPTS FROM 

CONFORMED VERSION OF PREPA TRUST AGREEMENT*

GRANTING CLAUSE (page 13) 

Pledge of revenues of 

the System 

Now, THEREFORE, THIS AGREEMENT WITNESSETH, that in 

consideration of the premises, of the acceptance by the Trustee of the 

trusts hereby created, and of the purchase and acceptance of the bonds 

by the holders thereof, and also for and in consideration of the sum of 

One Dollar to the Authority in hand paid by the Trustee at or before 

the execution and delivery of this Agreement, the receipt of which is 

hereby acknowledged, and for the purpose of fixing and declaring the 

terms and conditions upon which the bonds are to be issued, executed, 

authenticated, delivered, secured and accepted by all persons who 

shall from time to time be or become holders thereof, and in order to 

secure the payment of all the bonds at any time issued and outstanding 

hereunder and the interest and the redemption premium, if any, 

thereon according to their tenor, purport and effect, and in order to 

secure the performance and observance of all the covenants, 

agreements and conditions therein and herein contained, the 

Authority has executed and delivered this Agreement and has pledged 

and does hereby pledge to the Trustee the revenues of the System, 

subject to the pledge of such revenues to the payment of the principal 

of and the interest on the 1947 Indenture Bonds (hereinafter 

mentioned), and other moneys to the extent provided in this 

Agreement as security for the payment of the bonds and the interest 

and the redemption premium, if any, thereon and as security for the 

satisfaction of any other obligation assumed by it in

Agreement of parties. connection with such bonds, and it is mutually agreed and covenanted 

by and between the parties hereto, for the equal and proportionate 

benefit and security of all and singular the present and future holders 

of the bonds issued and to be issued under this Agreement, without 

preference, priority or distinction as to lien or otherwise, except as 

otherwise hereinafter provided, of any one bond over any other bond, 

by reason of priority in the issue, sale or negotiation thereof or 

otherwise, as follows: 

(*) Filed as ECF No. 118-1. All highlighting and underlining added to Exhibit. 

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SECTION 701 (pages 90-91) 

ARTICLE VII. 

PARTICULAR COVENANTS. 

Payment of principal, 

interest and premium.

Pledge of revenues. 

Bonds not general 

obligations of 

Commonwealth of 

Puerto Rico. 

SECTION 701. The Authority covenants that it will promptly 

pay the principal of and the interest on each and every bond issued 

under the provisions of this Agreement at the places, on the dates and 

in the manner specified herein and in said bonds and in the coupons, 

if any, appertaining thereto, and any premium required for the 

retirement of said bonds by purchase or redemption, according to the 

true intent and meaning thereof. Until the 1947 Indenture Bonds have 

been paid or provision has been made for their payment and the 

release of the 1947 Indenture, such principal, interest and premium 

are payable solely from moneys in the Renewal and Replacement 

Fund and said moneys are hereby pledged to the payment thereof in 

the manner and to the extent hereinabove particularly specified. After 

the 1947 Indenture Bonds have been paid or provision has been made 

for their payment and the release of the 1947 Indenture, such 

principal, interest and premium will be payable solely from the 

Revenues and said Revenues are hereby pledged to the payment 

thereof in the manner and to the extent hereinabove particularly 

specified. Nothing in the bonds or in this Agreement shall be deemed 

to constitute the bonds a debt or obligation of the Commonwealth of 

Puerto Rico or any of its municipalities or other political subdivisions, 

and neither the Commonwealth of Puerto Rico nor any such 

municipalities or other political subdivisions shall be liable for the 

payment of the principal of or the interest on the bonds. 

Offices or agencies for 

payment of coupon 

bonds and coupons. 

The Authority further covenants that so long as any bonds 

issuable as coupon bonds shall be outstanding it will cause offices or 

agencies where the coupon bonds and coupons may be presented for 

payment to be maintained in the Borough of Manhattan, City and 

State of New York.

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SECTION 507 (pages 71-75) 

ARTICLE V.

REVENUES AND FUNDS. 

* * * 

Sinking Fund.

Bond Service

Account, Reserve 

Account and 

Redemption Account.

Reserve Maintenance 

Fund. 

SECTION 507. A special fund is hereby created and designated 

the “Puerto Rico Electric Power Authority Power Revenue Bonds 

Interest and Sinking Fund” (herein sometimes called the “Sinking 

Fund”). There are hereby created three separate accounts in the 

Sinking Fund designated “Bond Service Account”, “Reserve 

Account” and “Redemption Account”, respectively. Another special 

fund is hereby created and designated “Puerto Rico Electric Power 

Authority Reserve Maintenance Fund” (herein sometimes called the 

“Reserve Maintenance Fund”). Two other special funds are hereby 

created and designated “Puerto Rico Electric Power Authority Selfinsurance Fund” (herein some times called the “Self-insurance 

Fund”) and “Puerto Rico Electric Power Authority Capital 

Improvement Fund” (herein sometimes called the “Capital 

Improvement Fund”). Another special fund is hereby created and 

designated “Puerto Rico Electric Power Authority Subordinate 

Obligations Fund” (herein some times called the “Subordinate 

Obligations Fund”). On or before the last day of the month during 

which the first Series of bonds shall be issued under the provisions of 

Section 208 of this Agreement and on or before the 25th day of each 

month thereafter, (i) until the outstanding 1947 Indenture Bonds have 

been paid or provision has been made for their payment and the 

release of the 1947 Indenture, it shall be the duty of the Executive 

Director or any officer or employee of the Authority designated by 

him for such purpose to withdraw from the Renewal and Replacement 

Fund, and (ii) after the outstanding 1947 Indenture Bonds have been 

paid or provision has been made for their payment and the release of 

the 1947 Indenture it shall be the duty of the Treasurer to withdraw 

from the Revenue Fund, all of the moneys then held to the credit of 

such Fund (less any amount equal to the amount of Federal Subsidy 

Payments that have not been received as of the 25th of the month 

preceding the Interest Payment Date to which such Federal Subsidy 

Payments relate, which amount will be held in the Revenue Fund and 

(x) if the Federal Subsidy Payment has not been received by the 

Authority by such Interest Payment Date, transferred to the Bond 

Service Account on the Interest Payment Date and applied to the 

payment of interest on Bonds or (y) if the Federal Subsidy Payment 

has been received by the Authority on or before such Interest 

Payment Date, remain on deposit in the Revenue Fund for application 

in accordance with the provisions below in the following calendar 

month) and deposit the moneys so withdrawn to the credit of the 

following Accounts and Funds in the following order: 

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(a) to the credit of the Bond Service Account, such 

amount thereof (or the entire sum so withdrawn if less than the 

required amount) as may be required to make the total amount then 

to the credit of the Bond Service Account equal to the sum of 

(i) the Interest Accrual on all the outstanding bonds to 

and including the first day of the next calendar month, and 

(ii) the Principal Accrual on the outstanding serial 

bonds to and including the first day of the next calendar 

month; 

(b) to the credit of the Redemption Account, such 

amount, if any, of any balance remaining after making the deposit 

under clause (a) above (or the entire balance if less than the required 

amount) as may be required to make the amount then to the credit of 

the Redemption Account equal to the Amortization Accrual to and 

including the first day of the next calendar month; 

(c) to the credit of the Reserve Account, such amount, if 

any, of any balance remaining after making the deposits under clauses 

(a) and (b) above (or the entire balance if less than the required 

amount) as may be required to make the amount then to the credit of 

the Reserve Account, including the amount of any Reserve Account 

Insurance Policy or any Reserve Account Letter of Credit therein, 

equal to the interest payable on the bonds of each Series issued 

hereunder within the next ensuing twelve (12) months; (A) provided, 

however, that the amount so deposited in any month in respect of 

bonds of any Series issued under Sections 208 or 209 of this 

Agreement need not exceed one-sixtieth (1/60) of the amount of the 

increase in the interest payable within the next ensuing twelve (12) 

months resulting from the issuance of the bonds of such Series; and 

that if the amount so deposited in any month to the credit of said 

Account shall be less than the required amount for such month, the 

requirement therefor shall nevertheless be cumulative and the amount 

of any deficiency in any month shall be added to the amount 

otherwise required to be deposited in each month thereafter until such 

time as such deficiency shall have been made up; and that in the case 

of Variable Rate Bonds, the minimum amount to be deposited in the 

Reserve Account over the period required herein, shall be based 

initially on the interest rate in effect on the date of issuance of the 

Variable Rate Bonds and then shall be adjusted on the 25th day of 

each subsequent month based on the actual interest accrued from the 

25th day of the previous month to the date of adjustment, except that 

in the case of Variable Rate Bonds in respect of which the Authority 

has notified the Trustee that a SWAP agreement is in effect, the 

Trustee shall use the SWAP rate in calculating the interest payable on 

such Bonds within the next ensuing twelve (12) months; and that in 

the case of Capital Appreciation Bonds, the minimum amount 

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required to be deposited in the Reserve Account shall be an amount 

derived from the interest rate which has been used to calculate the 

assumed yield on such bonds through their maturity times the 

Accreted Value of such bonds on the Valuation Date occurring at or 

after the first day of the twelfth succeeding month to the date of 

calculation of this requirement, as may be further specified in the 

resolution authorizing Capital Appreciation Bonds; and (B) provided, 

however, that in the case of Federally Subsidized Bonds, the amount 

of interest deemed to be payable on such bonds from the date of 

issuance of such Federally Subsidized Bonds and for so long as the 

Trustee shall receive the scheduled amount of the Federal Subsidy 

Payments on or before such interest shall be payable shall exclude the 

amount of interest to be paid from the Federal Subsidy and provided 

further, however, that if the Trustee shall not receive the scheduled 

amount of the Federal Subsidy Payments on or before the date interest 

on such Federally Subsidized Bonds is payable or within thirty (30) 

of the date such Federal Subsidy Payments were scheduled to be 

received under the then current applicable law and regulations, then 

for purposes of the calculation of interest to be credited to the Reserve 

Account, the amount shall be equal to the interest payable on the 

bonds of each Series issued hereunder within the next twelve (12) 

months. 

(d) to the credit of the Reserve Maintenance Fund, such 

amount, if any, of any balance remaining after making the deposits 

under clauses (a), (b) and (c) above (or the entire balance if less than 

the required amount) as may be recommended by the Consulting 

Engineers, as provided by Section 706 of this Agreement, to be 

deposited to the credit of said Fund during such month; provided, 

however, that if the amount so deposited to the credit of said Fund in 

any month shall be less than the amount recommended by the 

Consulting Engineers, the requirement therefor shall nonetheless be 

cumulative and the amount of any such deficiency in any month shall 

be added to the amount otherwise required to be deposited in each 

month thereafter until such time as such deficiency shall have been 

made up, unless such requirement shall have been modified by the 

Consulting Engineers in writing, a signed copy of such modification 

to be filed with the Authority; and provided further, however, that in 

the event that the Authority shall so covenant in respect of any 

Subordinate Obligation, as authorized by Section 516 of this 

Agreement, the deposit required by this clause (d) in any month shall 

be equal to the least of 

(i) the amount described above in this clause (d), 

(ii) the amount of $400,000, and 

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(iii) an amount that when added to the amount then held to the 

credit of the Reserve Maintenance Fund shall make the total amount 

to the credit of said Fund equal to $10,000,000; 

(e) to the credit of one or more special accounts in the 

Subordinate Obligations Fund, such amount, if any, of any balance 

remaining after making the deposits under clauses (a), (b), (c) and (d) 

above (or the entire balance if less than the required amount) that 

together with funds then held to the credit of the Subordinate 

Obligations Fund will make the total amount then to the credit thereof 

equal to any amounts required to be paid or accrued with respect to 

any Subordinate Obligations prior to the Deposit Day of the next 

succeeding month from or to the Subordinate Obligations Fund; 

(f) in the event the Authority shall have covenanted pursuant 

to Section 516 with respect to Subordinate Obligations to limit its 

deposit to the Reserve Maintenance Fund in accordance with the 

provisions of the second proviso of clause (d) above and in fact the 

deposit to said Fund pursuant to clause (d) was limited to the amount 

described in subclause (ii) or (iii), to the credit of the Reserve 

Maintenance Fund, such amount, if any, of any balance remaining 

after making the deposits under clauses (a), (b), (c), (d) and (e) above 

(or the entire balance if less than the required amount) as may be 

required to make the total amount deposited to the credit of the 

Reserve Maintenance Fund in such month equal to the amount 

described in subclause (i) of clause (d) above; 

(g) On the date of the release of the 1947 Indenture, to the 

credit of the Self-insurance Fund an amount equal to the amount held 

to the credit of the General Reserve Fund under the 1947 Indenture 

on the date of such release remaining after making the deposits under 

clauses (a), (b), (c), (d), (e) and (f) above and thereafter such amount, 

if any, of any balance remaining after making the deposits under 

clauses (a), (b), (c), (d), (e) and (f) above, as the Consulting Engineers 

shall from time to time recommend; and 

(h) After the outstanding 1947 Indenture Bonds have been 

paid or provision has been made for their payment and the release of 

the 1947 Indenture, to the credit of the Capital Improvement Fund 

such amount, if any, of any balance remaining after making the 

deposits under clauses (a), (b), (c), (d), (e), (f) and (g) above, as the 

Consulting Engineers shall recommend as provided by Section 706 

of this Agreement; provided, however, that if the amount so deposited 

to the credit of said Fund during any fiscal year of the Authority shall 

be less than the amount recommended by the Consulting Engineers, 

the requirement therefor shall nevertheless be cumulative and the 

amount of any such deficiency in any such fiscal year shall be added 

to the amount otherwise required to be deposited in each fiscal year 

thereafter until such time as such deficiency shall have been made up, 

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unless such requirement shall have been modified by the Consulting 

Engineers in writing, a signed copy of such modification to be filed 

with the Authority. 

Until the 1947 Indenture Bonds have been paid or provision 

has been made for their payment and the release of the 1947 

Indenture, any balance remaining after making the deposits under 

clauses (a), (b) and (c) above shall be transferred to the Renewal and 

Replacement Fund. After the outstanding 1947 Indenture Bonds have 

been paid or provision has been made for their payment and the 

release of the 1947 Indenture, any balance remaining after making the 

deposits under clauses (a) through (h) above may be used for any 

lawful purpose of the Authority. 

The moneys in the Sinking Fund shall be held by the Trustee 

in trust, and the moneys in the Reserve Maintenance Fund, the Selfinsurance Fund and the Capital Improvement Fund shall be held by 

the Authority in trust, separate and apart from all other funds of the 

Authority, and shall be applied as hereinafter provided with respect 

to such Funds and, pending such application, shall be subject to a lien 

and charge in favor of the holders of the bonds issued and outstanding 

under this Agreement and for the further security of such holders until 

paid out or transferred as herein provided. The moneys in each 

account in the Subordinate Obligations Fund shall be held by the 

Authority (or a Depositary) in trust, separate and apart from all other 

funds of the Authority, and shall be applied as hereinafter provided 

with respect to such Fund and, pending such application, shall be 

subject to a lien and charge in favor of the holders of the Subordinate 

Obligations incurred in the manner provided under this Agreement 

and for the further security of such holders until paid out or 

transferred as herein provided. The Authority (or such Depositary) 

may establish one or more accounts within the Subordinate 

Obligations Fund corresponding to the source of moneys or particular 

Subordinate Obligations for each deposit made into said Fund so that 

the Authority (and such Depositary) may ascertain the source and date 

of deposit of the moneys in each such account. 

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SECTIONS 804 & 805 (pages 104-107) 

ARTICLE VIII. 

REMEDIES. 

Enforcement of 

remedies. 

* * * 

SECTION 804. Upon the happening and continuance of any 

event of default specified in Section 802 of this Article, then and in 

every such case the Trustee may proceed, and upon the written 

request of the holders of not less than ten per centum (10%) in 

aggregate principal amount of the bonds then outstanding hereunder 

shall proceed, subject to the provisions of Section 902 of this 

Agreement, to protect and enforce its rights and the rights of the 

bondholders under applicable laws or under this Agreement by such 

suits, actions or special proceedings in equity or at law, or by 

proceedings in the office of any board or officer having jurisdiction, 

either for the appointment of a receiver as authorized by the Authority 

Act or for the specific performance of any covenant or agreement 

contained herein or in aid or execution of any power herein granted 

or for the enforcement of any proper legal or equitable remedy, as the 

Trustee, being advised by counsel, shall deem most effectual to 

protect and enforce such rights; provided, however, that the Trustee 

shall not be required to proceed for the appointment of a receiver of 

the System unless it shall receive the written request of the holders of 

not less than twenty-five centum (25%) in principal amount of the 

bonds then outstanding under the provisions of this Agreement. 

In the enforcement of any remedy under this Agreement the 

Trustee shall be entitled to sue for, enforce payment of and receive 

any and all amounts then or during any default becoming, and at any 

time remaining, due from the Authority for principal, interest or 

otherwise under any of the provisions of this Agreement or of the 

bonds and unpaid, with interest on overdue payments of principal at 

the rate or rates of interest specified in such bonds, together with any 

and all costs and expenses of collection and of all proceedings 

hereunder and under such bonds, without prejudice to any other right 

or remedy of the Trustee or of the bondholders, and to recover and 

enforce any judgment or decree against the Authority, but solely as 

provided herein and in such bonds, for any portion of such amounts 

remaining unpaid and interest, costs and expenses as above provided, 

and to collect (but solely from moneys in the Sinking Fund and any 

other moneys available for such purpose) in any manner provided by 

law, the moneys adjudged or decreed to be payable. 

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Pro rata application 

of funds. 

SECTION 805. Anything in this Agreement to the contrary 

notwithstanding, if at any time the moneys in the Sinking Fund shall 

not be sufficient to pay the interest on or the principal of the bonds as 

the same shall become due and payable (either by their terms or by 

acceleration of maturities under the provisions of Section 803 of this 

Article), such moneys, together with any moneys then available or 

thereafter becoming available for such purpose, whether through the 

exercise of the remedies provided for in this Article or otherwise, 

shall be applied as follows : 

(a) If the principal of all the bonds shall not have become or 

shall not have been declared due and payable, all such moneys shall 

be applied 

first: to the payment to the persons entitled thereto of all 

installments of interest then due and payable in the order in which 

such installments became due and payable and, if the amount 

available shall not be sufficient to pay in full any particular 

installment, then to the payment, ratably, according to the amounts 

due on such installment, to the persons entitled thereto, without any 

discrimination or preference except as to any difference in the 

respective rates of interest specified in the bonds; 

second: to the payment to the persons entitled thereto of the 

unpaid principal of any of the bonds which shall have become due 

and payable (other than bonds called for redemption for the payment 

of which moneys are held pursuant to the provisions of this 

Agreement) in the order of their due dates, with interest on the 

principal amount of such bonds at the respective rates specified 

therein from the respective dates upon which such bonds became due 

and payable, and, if the amount available shall not be sufficient to pay 

in full the principal of the bonds due and payable on any particular 

date, together with such interest, then to the payment first of such 

interest, ratably, according to the amount of such interest due on such 

date, and then to the payment of such principal, ratably, according to 

the amount of such principal due on such date, to the persons entitled 

thereto without any discrimination or preference except as to any 

difference in the respective rates of interest specified in the bonds; 

and 

third: to the payment of the interest on and the principal of the 

bonds, to the purchase and retirement of bonds and to the redemption 

of bonds, all in accordance with the provisions of Article V of this 

Agreement. 

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(b) If the principal of all the bonds shall have become or 

shall have been declared due and payable, all such moneys shall be 

applied 

first: to the payment to the persons entitled thereto of all 

installments of interest due and payable on or prior to maturity, if any, 

in the order in which such installments became due and payable and, 

if the amount available shall not be sufficient to pay in full any 

particular installment, then to the payment, ratably, according to the 

amounts due on such installment, to the persons entitled thereto, 

without any discrimination or preference except as to any difference 

in the respective rates of interest specified in the bonds, and then to 

the payment of any interest due and payable after maturity on the 

bonds, ratably, to the persons entitled thereto, without any 

discrimination or preference except as to any difference in the 

respective rates of interest specified in the bonds ; and 

second: to the payment of the principal of the bonds, ratably, 

to the persons entitled thereto, without preference or priority of any 

bond over any other bond. 

(c) If the principal of all the bonds shall have been 

declared due and payable and if such declaration shall thereafter have 

been rescinded and annulled under the provisions of Section 803 of 

this Article, then, subject to the provisions of paragraph (b) of this 

Section in the event that the principal of all the bonds shall later 

become due and payable or be declared due and payable, the moneys 

remaining in and thereafter accruing to the Sinking Fund shall be 

applied in accordance with the provisions of paragraph (a) of this 

Section. 

The provisions of paragraphs (a), (b) and (c) of this Section 

are in all respects subject to the provisions of Section 801 of this 

Article. 

Whenever moneys are to be applied by the Trustee pursuant 

to the provisions of this Section, such moneys shall be applied by the 

Trustee at such times, and from time to time, as the Trustee in its sole 

discretion shall determine, having due regard to the amount of such 

moneys available for application and the likelihood of additional 

moneys becoming available for such application in the future; the 

deposit of such moneys with the Paying Agents, or otherwise setting 

aside such moneys, in trust for the proper purpose shall constitute 

proper application by the Trustee; and the Trustee shall incur no 

liability whatsoever to the Authority, to any bondholder or to any 

other person for any delay in applying any such moneys, so long as 

the Trustee acts with reasonable diligence, having due regard to the 

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circumstances, and ultimately applies the same in accordance with 

such provisions of this Agreement as may be applicable at the time of 

application by the Trustee. Whenever the Trustee shall exercise such 

discretion in applying such moneys, it shall fix the date (which shall 

be an interest payment date unless the Trustee shall deem another date 

more suitable) upon which such application is to be made and upon 

such date interest on the amounts of principal to be paid on such date 

shall cease to accrue. The Trustee shall give such notice as it may 

deem appropriate of the fixing of any such date, and shall not be 

required to make payment to the holder of any unpaid coupon or any 

bond until such coupon or such bond and all unmatured coupons, if 

any, appertaining to such bond shall be surrendered to the Trustee for 

appropriate endorsement, or for cancellation if fully paid. 

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SECTION 1102 (pages 117-118) 

ARTICLE XI. 

SUPPLEMENTAL AGREEMENTS. 

* * * 

Modification of 

Agreement with 

consent of 60% of 

bondholders. 

Restrictions on 

modifications. 

SECTION 1102. Subject to the terms and provisions contained 

in this Section, and not otherwise, the holders of not less than sixty 

per centum (60%) in aggregate principal amount of the bonds then 

outstanding shall have the right, from time to time, anything 

contained in this Agreement to the contrary notwithstanding, to 

consent to and approve the execution by the Authority and the Trustee 

of such agreement or agreements supplemental hereto as shall be 

deemed necessary or desirable by the Authority for the purpose of 

modifying, altering, amending, adding to, repealing or rescinding, in 

any particular, any of the terms or provisions contained in this 

Agreement or in any supplemental agreement; provided, however, 

that nothing herein contained shall permit, or be construed as 

permitting, (a) an extension of the maturity of the principal of or the 

inerest on any bond issued hereunder, or (b) a reduction in the 

principal amount of any bond or the redemption premium or the rate 

of interest thereon, or (c) the creation of a lien upon or a pledge of the 

Revenues other than any lien and pledge created by or permitted by 

this Agreement, or (d) a preference or priority of any bond or bonds 

over any other bond or bonds, or (e) a reduction in the aggregate 

principal amount of the bonds required for consent to such 

supplemental agreement. Nothing herein contained, however, shall be 

construed as making necessary the approval by bondholders of the 

execution of any supplemental agreement as authorized in Section 

1101 of this Article. 

* * * 

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