EXHIBIT 6 

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 1 of 39
sMunicipal Secondary Market Disclosure Information Cover Sheet 

Municipal Securities Rulemaking Board (MSRB) 

Electronic Municipal Market Access System (EMMA) 

Additional / Voluntary Event-Based Disclosure 

 

THIS FILING RELATES TO ALL OR SEVERAL SECURITIES ISSUED BY THE ISSUER, OR ALL OR SEVERAL 

SECURITIES OF A SPECIFIC CREDITOR: 

Issuer’s Name: Puerto Rico Electric Power Authority 

Other Obligated Person’s Name (if any): 

Nine-digit CUSIP number(s): 745268 and 74526Q 

TYPE OF INFORMATION PROVIDED: 

 

A. Amendment to Continuing Disclosure Undertaking

B. Change in Obligated Person 

C. Notice to Investor Pursuant to Bond Documents 

D. Communication from the Internal Revenue Service 

E. Bid for Auction Rate and Other Securities 

F. Capital or Other Financing Plan 

G. Litigation / Enforcement Action 

H. Change of Tender Agent. Remarketing Agent or Other On-going Party 

 

I. Derivative or Other Similar Transaction 

J. Other Event-Based Disclosures: Mediation Disclosure Materials. 

I represent that I am authorized by the issuer, obligor or its agent to distribute this information publicly. 

/s/ Nelson J. Pérez Méndez 

Nelson J. Pérez Méndez 

Puerto Rico Fiscal Agency and Financial Advisory Authority, 

 as Fiscal Agent for the Commonwealth and its instrumentalities 

Dated: December 16, 2022 

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 2 of 39
PUERTO RICO ELECTRIC POWER AUTHORITY 

NOTICE OF VOLUNTARY FILING 

DISCLOSURE OF MATERIALS EXCHANGED IN MEDIATION 

Pursuant to orders of the United States District Court for the District of Puerto Rico presiding over the 

debt restructuring case of the Puerto Rico Electric Power Authority (“PREPA”) under Title III of the 

Puerto Rico Oversight, Management, and Economic Stability Act, the Financial Oversight and 

Management Board for Puerto Rico (the “FOMB”) and the Puerto Rico Fiscal Agency and Financial 

Advisory Authority (“AAFAF”) entered into mediation regarding a potential settlement of, among 

other things, PREPA’s indebtedness under its revenue bonds held or insured by members of the Ad 

Hoc Group of PREPA Bondholders, National Public Finance Insurance Company, Assured Guaranty 

Corp. and Assured Guaranty Municipal Corp., and Syncora Guarantee, Inc. (collectively, the “Bond 

Parties”). 

During this mediation, the FOMB and the Bond Parties exchanged confidential information. 

Attached as Exhibit A are materials the FOMB provided to the Bond Parties on November 8 and 22 

and December 13, 2022. These materials were preliminary in nature, do not reflect any agreement 

reached, do not reflect additions to PREPA’s rates that the FOMB intends to implement, and were not 

approved by AAFAF. 

Attached as Exhibit B are materials the Bond Parties provided on November 30, 2022. Neither the 

FOMB nor AAFAF accepted the offers the Bond Parties made and both reserve all rights related to 

statements made therein. 

As a result of mediation, an agreement was reached with PREPA’s Fuel Line Lenders (as previously 

disclosed) and an agreement in principle has been reached between National and the FOMB. No 

agreement was reached among any other parties. 

Dated: December 16, 2022 

THIS NOTICE IS NOT AN OFFER WITH RESPECT TO ANY SECURITIES OR A SOLICITATION OF 

ACCEPTANCES OF A TITLE III PLAN WITHIN THE MEANING OF SECTION 1125 OF THE BANKRUPTCY 

CODE INCORPORATED INTO PROMESA SECTION 301. ANY SUCH OFFER OR SOLICITATION WILL 

COMPLY WITH ALL APPLICABLE SECURITIES LAWS AND PROVISIONS OF PROMESA. 

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 3 of 39
Exhibit A 

 

FOMB Materials 

 

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PREPA FOMB Proposal to Bondholder Group

DRA

November 8, 2022 Privileged and Confidential

Provided Pursuant to Court Ordered Mediation / Subject to FRE 408

Prepared with Advice of and at the Request of Counsel

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 5 of 39
▪ The prior Connectivity Fixed Charge Structure that was the basis of prior mediation proposals had some challenges 

that we have been unable to resolve

− In order to keep the lowest income residential accounts’ fixed charges affordable, it required significant charges 

to all other customers

• Top end residential accounts would have monthly charges in excess of $300 increasing their annually electric 

bill by $3,600

• Similarly, the top end commercial/industrial account had monthly charges at $240,000 (greater than $2.8 

million annually)

− Given the level of fixed charges mentioned above, the rate of grid defection is a significant concern, leading to an 

increase in cost of service for those remaining on the system

− Additionally, serious implementation risks exist 

• Privacy issues in Commonwealth Treasury providing income information to LUMA 

• Operational issues associated with creation of multiple income classes 

The All-Fixed Charge Structure

2

Provided Pursuant to Court Ordered Mediation / Subject to FRE 408

Prepared with Advice of and at the Request of Counsel

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 6 of 39
▪ Hybrid Revenue Structure: As an alternative, the FOMB advisory group have created a hybrid structure that 

combines both fixed charges and volumetric charges as a revenue source for debt service

▪ Fixed Charges: Unlike the all-fixed charge structure, this hybrid approach has significantly smaller monthly fixed 

charges, which does incorporate revenues from renewable customers

− Residential: Subsidized and Medicaid recipient residential accounts would have no monthly fixed charge and 

General Service residential accounts would have a charge of $21 per month ($252 per annum) 

− Commercial/Industrial: Smaller Commercial and Industrial customers would have a monthly fixed charge of ~$26 

per month ($316 per year) whereas larger customers would have a monthly fixed charge of ~$2,363 ($28,350 per 

annum) 

▪ Volumetric Charges: In addition, certain customers would have a volumetric charge as follows:

− Subsidized / Medicaid Residential: Volumetric charge would only apply if they exceed 500kWh in energy 

consumption per month

− General Service Residential: Base volumetric charge of 0.75 c/kWh for the first 500kWh of energy usage and an 

incremental Vol. charge of 3.0 c/kWh for all energy consumption above 500kWh

− Commercial/Industrial: Like general residential customers, Commercial / Industrial accounts will have a base 

volumetric charge for the first 500kWh used and a higher or equivalent vol. charge on energy usage above 

500kWh

▪ The following page has a detailed table explaining the fixed and volumetric charges by account type and class

Replacement Approach – A Fixed and Volumetric Charge Hybrid

3

Provided Pursuant to Court Ordered Mediation / Subject to FRE 408

Prepared with Advice of and at the Request of Counsel

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▪ Fixed Charge: Certain classes may be subject to a monthly fixed charge depending on the type of account (Residential / 

Commercial / Industrial) and class in that type of account

− Example: A GSR Residential account will have a $21 a month fixed charge whereas the Subsidized Residential class will 

have no monthly fixed charge

▪ Volumetric Charge: Classes will have a volumetric charge applied to the first 500kWh they use and a separate charge for 

energy consumption above 500kWh; in many cases, the volumetric charge is the same

− Example: A GSR Residential account will have a volumetric charge of 0.75 c/kWh for the 1st 500kWh they use and a 

3.0 c/kWh for energy usage above 500kWh

− Example 2: A GST 213 Commercial account will have the same volumetric 1.0 c/kWh volumetric charge for all energy 

consumption without regard to amount

Table Detailing Proposed Hybrid Fixed / Volumetric Structure

4

Provided Pursuant to Court Ordered Mediation / Subject to FRE 408

Prepared with Advice of and at the Request of Counsel

 2021 Fixed Charge Volumetric Charge (c/kWh) Increase from

RESIDENTIAL Customers Monthly Annual 1st 500kWh > 500 kWh 1st 500kWh

Subsidized Residential 324,882 - - - 1.50 1.50

GSR (medicaid recipient) 296,545 - - - 1.50 1.50

GSR (general) 729,503 21 252 0.75 3.00 2.25

Total 1,350,930

COMMERCIAL

GSS 211 112,990 26 316 1.50 3.00 1.50

GSP 212 10,918 1,050 12,600 1.50 1.50 -

GST 213 399 2,363 28,350 1.00 1.00 -

Total 124,308

INDUSTRIAL

311 112 26 316 2.25 2.25 -

312 228 1,050 12,600 2.25 2.25 -

313 202 2,363 28,350 1.50 1.50 -

363 14 2,363 28,350 0.75 0.75 -

333 1 2,363 28,350 0.75 0.75 -

963 2 2,363 28,350 0.75 0.75 -

Total 559

*Preliminary, for illustration purposes; subject to change

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▪ The 2022 Fiscal Plan Load Projections are projected to decline throughout the forecast period

2022 Fiscal Plan Load Projections

5

Provided Pursuant to Court Ordered Mediation / Subject to FRE 408

Prepared with Advice of and at the Request of Counsel

 -

 2,000

 4,000

 6,000

 8,000

 10,000

 12,000

 14,000

 16,000

 18,000

 2024 2029 2034 2039 2044 2049

(millions of kWh)

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▪ The fixed charge component of the hybrid revenue structure provides stability in revenues as load declines (see 

prior page for 2022 Fiscal Plan Load Projections)

▪ Based on the projected cash flows and 2022 Fiscal Plan Load Projections, the equivalent c/kWh charge as if 100% of 

the charges are volumetric will increase over time

− For instance, the initial equivalent c/kWh charge utilizing 2022 FP Projections in 2024 is 3.7 c/kWh but increases 

to 5.99 c/kWh in 2051 (see bottom right chart/table)

Illustration of Cash Flows Utilizing 2022 Fiscal Plan Projections

6

Provided Pursuant to Court Ordered Mediation / Subject to FRE 408

Prepared with Advice of and at the Request of Counsel

Breakdown of Fixed / Volumetric Revenues 

During Fiscal Plan Forecast Period (2051)

Equivalent c/kWh Charge for Fixed / Volumetric 

Revenues Based Upon 2022 Fiscal Plan Load Proj.

All values in ($000’s) or c/kWh where applicable

Fixed Charge Revenues remain resilient 

while Load is expected to decline which 

impacts the projected volumetric revenues

Initial c/kWh Avg. c/kWh Final c/kWh

Fixed Charge 2.36 3.60 4.66

Vol. Charge 1.34 1.33 1.34

Total 3.71 4.93 5.99 -

 100,000

 200,000

 300,000

 400,000

 500,000

 600,000

 700,000

 2024 2029 2034 2039 2044 2049

Fixed Charge Revenues Volumetric Revenues

 -

 1.000

 2.000

 3.000

 4.000

 5.000

 6.000

 7.000

 2024 2029 2034 2039 2044 2049

Fixed Charge Equivalent c/kWh Volumetric Equivalent c/kWh

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▪ Exchange Ratio as of the Effective Date: See below

− No support fees, no post petition interest, and no reimbursement of professional fees

▪ Coupon / Tax Status: 6.00% / Tax-exempt

▪ Maturity: 50-year final maturity with expected repayment of 35 years

▪ Hybrid Revenue Structure: See prior page for description of hybrid fixed and volumetric structure; Bondholders 

would receive their proportional share of cash flow generated and be on parity with other PREPA creditors

− Once the Revenue Bonds are paid off the Fixed Charge component of the Hybrid Revenue Structure will 

terminate

− Fixed charges based on metrics to be determined by the FOMB

− Subject to necessary court and PREB approvals, equivalent of 1.0 c/kWh volumetric charge following signing of 

new RSA until the plan effective date will be payable as interest on the existing bonds/claims upon Plan 

consummation on a pro-rata basis amongst PREPA creditors; if the Plan is not consummated, the equivalent of 

1.0 c/kWh volumetric charge will be a reduction on account of creditors’ treatment on their claim split on a prorata basis amongst PREPA creditors

▪ Call Protection: 10-year non-call then callable at par

▪ Structure: Revenue Bonds will turbo from available revenue receipts after payment of interest

− No Debt Service Reserve Fund Requirement

− Net pledge of revenues with volumetric charge adjustments required to ensure that all interest is paid currently 

through 50 year final maturity

• In the event that principal remains outstanding after 50-year final maturity, the charge will continue until 

principal is repaid; interest no longer accrues beyond final maturity date

− In the event of a Federally declared disaster as a result of a storm or other catastrophic event that disrupts 

operations at the utility, PREPA may choose to defer debt service for up to one year; if deferred, interest will 

accrete until paid

Overview of Key Terms of a FOMB Proposal

7

Provided Pursuant to Court Ordered Mediation / Subject to FRE 408

Prepared with Advice of and at the Request of Counsel

All values in ($000’s) where applicable

Claim Bond $ Recovery %

Bondholders 8,476,517 6,073,425 71.65%

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▪ Contingent Value Instruments Considerations: Below are considerations for CVIs that are critical for the FOMB

− Maturity: 50-year final maturity

− Interest / Tax Status: Taxable instrument, non-interest bearing and NO requirement to use best efforts to obtain 

tax-exemption

− Notional Value: When combined with the Revenue Bond recovery, the notional value of the CVI will not exceed 

100% of the claim value as of petition date for any of the creditor classes

• Any unpaid balance on the CVI after its final maturity will be extinguished without further payment

− Call Protection: Call protection structure to match Commonwealth CVI structure; 

• May consider an option to exchange outstanding CVI notional value into tax-exempt Revenue Bonds on or after 

a specified date and pre-specified exchange ratio

− Trigger Mechanism: Where applicable, the trigger mechanism will be calculated based upon the 2022 Fiscal Plan 

(or later) Projections 

• If the 2022 Fiscal Plan is the basis for the trigger mechanism, the CVI will not project any positive cashflow

▪ Contingent Value Instrument Structures: Below are two CVI Structures to be negotiated

− Structure 1: As in the FOMB’s September 13 proposal, the CVI cash flows will be based upon OPEX reductions 

below the 2022 Fiscal Plan projections in which PREPA and creditors both participate in the shared savings at a to 

be negotiated percentage

• Similar to Sept. 13 proposal, fuel surcharge, debt service on the Revenue bonds and any future debt along with 

any contractual payments due to the T&D and Generation operators not already accounted for in the 2022 

Fiscal Plan would be excluded from the calculation

− Structure 2: Following repayment of the Revenue Bonds, the CVI will receive the volumetric charge only in the 

hybrid structure described previously through year 50 on a sharing basis to be determined

• If triggered, the cash flows will be payable in the following fiscal year to CVI holders

Overview of CVI Considerations and Structures

8

Provided Pursuant to Court Ordered Mediation / Subject to FRE 408

Prepared with Advice of and at the Request of Counsel

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 12 of 39
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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 13 of 39
Pre-Decisional | Privileged & Confidential Draft | Analysis Subject to Material Change

DRAFT – HIGHLY PRELIMINARY ATTORNEY-CLIENT PRIVILEGE – CREATED AT REQUEST OF LEGAL COUNSEL

PREPA Mediation

November 2022

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2

Pre-Decisional | Privileged & Confidential Draft | Analysis Subject to Material Change

DRAFT – HIGHLY PRELIMINARY ATTORNEY-CLIENT PRIVILEGE – CREATED AT REQUEST OF LEGAL COUNSEL

Bondholder proposals result in lower affordability/higher SOW for longer period of time

Preliminary

Proposal features for charge to general 

residential cohort

FOMB

▪ Fixed charge: $21/month

▪ Variable charge

– <500 kWh: $0.008/kWh

– >500 kWh: $0.030/kWh

2024 26 28 30 32 34 36 2040

0

38

5.5

6.0

6.5

7.0

7.5

8.0 FOMB proposal

Bondholder proposal, 1.25% annual increase

Share of Wallet, FY 2024 – 2040 (% of median income, nominal $)

Bondholder, 1.25% annual increase

▪ Fixed charge: $21/month, increase annually 

($25.62/month in FY2040, nominal)

▪ Variable charge, increase annually

– <500 kWh: $0.008/kWh ($0.009/kWh in FY2040, 

nominal)

– >500 kWh: $0.030/kWh ($0.037/kWh in FY2040, 

nominal)

Preliminary

Monthly 

Electricity Bill1

Median Household Monthly Income

=

Electricity 

Share of 

Wallet

Proposed additional 

debt charges +

Share of Wallet calculation

1. Based on gross loads from June 2022 Fiscal Plan, and LUMA data on consumption by rate class

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3

Pre-Decisional | Privileged & Confidential Draft | Analysis Subject to Material Change

DRAFT – HIGHLY PRELIMINARY ATTORNEY-CLIENT PRIVILEGE – CREATED AT REQUEST OF LEGAL COUNSEL

Rate structure model assumptions

Core Assumptions

Distributed generation: Distributed generation (DG) load reaching 4.3 TWh (~26% of Gross Load) in FY50, projected to 

grow 11% p.a. from FY22-32, and 3% p.a. from FY33-50

Energy efficiency: Energy efficiency (EE) uptake following Act-17 guidance, reaching 30% of 2019 gross load (~4.8 TWh) 

by FY40 and 6.5 TWh(~40% of FY19 gross load)

Elasticity: Short-run elasticity assumed at -0.2% and long-run increases until reaching -1.7%1,2

SOURCE: June 2022 Fiscal Plan

Income: Median annual income is $21,400 per household in FY2024 and grown according inflation assumed in June 2022 

Fiscal Plan

1. Buchsbaum, Jess; "Long-run price elasticities and mechanisms: Empirical evidence from residential electricity consumers"; February 2022

2. Elasticity calculations assume Fuel & Purchased Power are variable

Monthly electricity bill: Based on gross loads from June 2022 Fiscal Plan, and LUMA data on consumption by rate class 

(Non EITC eligible rate class with ~740k customers in 2024, ~490 kWh per month)

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4

Pre-Decisional | Privileged & Confidential Draft | Analysis Subject to Material Change

DRAFT – HIGHLY PRELIMINARY ATTORNEY-CLIENT PRIVILEGE – CREATED AT REQUEST OF LEGAL COUNSEL

Additional risks to be considered in order to assess the sustainability of rate projections with debt service (1/2)

Preliminary

Fuel volatility:

If fuel remains at current levels or there are future spikes, rates will increase above fiscal plan projections and affordability could 

be further challenged - fuel costs now make up 60% of the revenue requirement1 versus the 15 – 20% projected in the long-term

SOW for median income would increase by 2.0 percentage points to 7.7% if current fuel rates are in place in 2035

A

Capex:

Additional capex will be required to match federal funds during the next 10 years and after the federal funds are fully deployed

(~2035) which is not assumed in the fiscal plan. Based on an assessment of historical capex spending at a comparable set of 

utilities PREPA would be expected to require ~$92M (2035) up to ~$125M (2050) annually in addition to the Fiscal Plan that would

be rate based

SOW for median income would increase by 0.1 percentage points to 5.9% if expected capex spending occurs in 2035 

B

Population decline:

Further decline in population beyond the fiscal plan projections would could result in reduced revenues requiring an increase in 

rates to cover fixed costs and adversely impact affordability

C

1. Revenue requirement calculated from June 2022 Fiscal Plan as Fuel, Purchase Power, CILT Rider, Subsidies Rider, Non-fuel&PP O&M

2. Historical CILT consumption and contra revenues provided by LUMA, and CILT revenues sourced from June 2022 Fiscal Plan

3. From 5.7% SOW in 2035 under FOMB proposal

Detail to follow

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5

Pre-Decisional | Privileged & Confidential Draft | Analysis Subject to Material Change

DRAFT – HIGHLY PRELIMINARY ATTORNEY-CLIENT PRIVILEGE – CREATED AT REQUEST OF LEGAL COUNSEL

Additional risks to be considered in order to assess the sustainability of rate projections with debt service (2/2)

Preliminary

CILT:

Variability in CILT collections could further challenge revenue projections and shortfalls will require rate increases adversely impacting 

affordability – Net CILT collections have varied from -$56M to $19M since FY 20192

D

1. Revenue requirement calculated from June 2022 Fiscal Plan as Fuel, Purchase Power, CILT Rider, Subsidies Rider, Non-fuel&PP O&M

2. Historical CILT consumption and contra revenues provided by LUMA, and CILT revenues sourced from June 2022 Fiscal Plan

3. From 5.7% SOW in 2035 under FOMB proposal

Elasticity and Load Defection:

If load defection is higher than assumed in the fiscal plan due to higher distributed generation/energy efficiency technology adoption or 

more elastic consumer behavior due to high prices, revenues will decrease and rates would have to increase to cover fixed costs

E

Operational improvements and renewables deployment:

If LUMA fails to implement projected cost savings related to operational improvements or transition to lower cost renewables, costs will 

be higher than projected, rates will have to be increased to cover shortfall and affordability will be impacted

F

Storm event:

Another storm event will cause lost revenues and repair costs, not all of which are reimbursed by FEMA, therefore will require higher 

rates to cover

G

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 18 of 39
Pre-Decisional | Privileged & Confidential Draft | Analysis Subject to Material Change

DRAFT – HIGHLY PRELIMINARY ATTORNEY-CLIENT PRIVILEGE – CREATED AT REQUEST OF LEGAL COUNSEL

SOW Comparison

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2

Pre-Decisional | Privileged & Confidential Draft | Analysis Subject to Material Change

PRIVILEGE: PREPARED FOR MEDIATION

Considerations on using median household income and average household consumption for the 

affordability analysis

▪ Determining the monthly consumption level to be used for SOW calculations is NOT merely an exercise where available empiricaldata can be used correctly or incorrectly

– Empirical evidence suffers from multiple shortcomings: Some data is only available from PRCS, some from LUMA.

– Empirical evidence also suggests consumption levels at the low end far below typical consumption in similar climates by similar income groups, suggesting incomeconstrained underconsumption by parts of precisely the population group that risks not being able to afford electricity

– Bottom-up analyses and the use of (estimated) consumption by representative households (median income, no solar roof, little EE, etc.) are viable alternatives to 

purely statistical approaches

▪ Median household income was used, because the distribution of household income in Puerto Rico is highly skewed, median incomes are often used to assess 

affordability/standard of living related issues and in Puerto Rico median income close to poverty levels

– The income of Puerto Rican (PR) households is a highly skewed distribution with significant outliers: according to the most recent data from US Census, 26% of households earn 

$10k or less, 56% of households earn $25k or less, and only 31% of households earn more than $35k

– Half of households earn less than the median PR household income of $21k, and half of households earn more – making it a good representation of an “average” household

– Median income is close to the poverty level for the average household size of 2.6 persons per household

▪ Median household consumption was not used, because it could not be reliably estimated from PREPA/LUMA data or from the 2021 and 2022 FP forecasts

– The FP includes load and population forecasts, but it does not provide median household consumption or a distribution of how consumption varies across households (e.g., by 

income cohort); LUMA data includes customer counts within consumption buckets, but is not sufficiently detailed to estimate the distribution of per customer consumption

▪ Average (i.e., mean) household consumption was used as one scenario, because (a) the data is available, (b) because the distribution of consumption is less skewed than 

the distribution of income, and (c) because it more closely resembles bottom-up estimates of necessary electricity consumption

– Average Household Consumption = Total Residential Consumption / Total Number of Households; this methodology can be used to calculate average household consumption for 

any year through 2040 based on load and population forecast data from the FP model and is therefore aligned with the latest forecasts from PREPA and the 2022 FP, which 

incorporate critical load drivers such as EV/EE/DG adoption and population decline

– This methodology and use of average household consumption is consistent with how other agencies report electricity usage (e.g., EIA reports average household consumption)

– Average likely includes income driven consumption above what is necessary for the median income household, but also observed consumption from low-income households who 

are likely constrained to consuming less than what a bottom-up estimate would determine as a minimum necessary consumption level

▪ Bondholders asserted that “the median household in Puerto Rico consumes an estimated 21% less electricity than the average household” and should be used to assess 

SOW

– Bondholders have not provided data and calculations used to estimate median household consumption

– Bondholders have not provided conceptual arguments to support the use of median consumption estimates based on observed data – not at all clear that apples-toapples comparison requires either median/median or mean/mean comparisons.

Case:17-03283-LTS Doc#:24535-6 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 20 of 39
3

Pre-Decisional | Privileged & Confidential Draft | Analysis Subject to Material Change

PRIVILEGE: PREPARED FOR MEDIATION

A bottom-up analysis of energy demands for an average household highlights the true energy 

requirement of a household that is financially unconstrained 

Estimated customer monthly consumption by key appliance type, 

kWh per month (EIA RECS customer classification)

Source: EIA; Hernandez et al. (2016), “Housing hardship and energy insecurity among native-born and immigrant low-income families with children in the United States.” [Cited by AG on pg. of 8 of June 16, 2022 pres.]

21 22 20 22 20 18 21 20 20

414

19 24 19 18 19 21 23 20 25

50 48 51 42 48 50 51 50 51

102 100 94

59

76 96 103 91 116 110

254 290 227 242 247 286 301

222

407

281

28 30

30 17 20

24 26

24

27 261 220 368

131 154

170 175

178

205

218

664

Single family 

detached

2 Member 

Household

851

< $20,000 Rural

733

20

809

734

$60,000 -

$79,999

735 700

53

$20,000 -

$39,999

4 Member 

Household

BH suggested 

consumption 

average

603

23

27

Hot-humid 

Climate

South Atlantic US East 

South Central

584

530

Air Water heating

conditioning

Ceiling fans Lighting Most-used refrigerators Cooking Most-used TVs

▪ It is impossible to replicate the low observed consumption levels with 

AC included

▪ Hernandez paper (cited by AG in support of 10%) includes AC among 

“essential” energy utilities 

Key takeaways Hernandez et al paper excerpt (cited by AG)

US average customer

Case:17-03283-LTS Doc#:24535-6 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 21 of 39
4

Pre-Decisional | Privileged & Confidential Draft | Analysis Subject to Material Change

PRIVILEGE: PREPARED FOR MEDIATION

The paper AG cites in support of a 10% SOW misinterprets the UK approach and fails to acknowledge 

that parts of the UK have changed the fuel poverty calculation

AG cites a UK Fuel Poverty Methodology Handbook to justify the use 

of a 10% electricity SOW

▪ UK approach does NOT use empirical consumption data by low-income 

households, but rather calculates a minimum level of fuel/electricity consumption 

needed to allow for a minimally comfortable living standard (min temperatures)

▪ However, AG’s calculation fails to make the income adjustments that are made 

under the cited methodology

– The 10% are applied to “adjusted” income, where rent, local taxes and water and 

sewer bills are subtracted

– Using the sample calculation included in the UK (Scottish) legislation results in a 

6.5% SOW relative to unadjusted income

– Local PR costs for rent/water & sewer could well be above the relative costs in the 

UK, further reducing the max wallet share using this methodology

▪ Also, parts of the UK (England, Scotland) have changed methodology based on 

the recognition that the income share approach has serious shortcomings

– The new methodology uses an approach that tests whether fuel/electricity bills 

would push adjusted income below 90% of the minimum adjusted income level, 

which is increased by 27.5% for islands and small rural areas

– Preliminary analysis suggests that this new approach would lead to less affordability 

for any given income and electric bill

Excerpts from the UK reports

AG Scotish Gov

Fuel Poverty Threshold 10% 10%

Monthly Income £1,150 £1,150

Rent £350 £350

Council Tax, Water and Sewer £50 £50

Adjusted Income £1,150 £750

Max Electricity Bill to Avoid Fuel Poverty £115 £75

Implied SOW based on Gross Income 10.0% 6.5%

Source: Based on numerical example provided in https://www.legislation.gov.uk/asp/2019/10/notes/division/3/3/1#paragraph-36 and not adjusted for Puerto Rico; UK paper cited by AG: page 1 in 

https://www.gov.uk/government/publications/fuel-poverty-statistics-methodology-handbook

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 22 of 39
5

Pre-Decisional | Privileged & Confidential Draft | Analysis Subject to Material Change

DRAFT – HIGHLY PRELIMINARY ATTORNEY-CLIENT PRIVILEGE – CREATED AT REQUEST OF LEGAL COUNSEL

The presentation and issues identified by the bondholders do not consider any risks to the system and 

do not attempt to size or outline the impact the risks may pose to the SOW or the system (1/3)

A

Capex:

During the first 10 years, PREPA will need to provide an additional $500M (5% of the $10B paid over ~10 years) of cost share to access 

FEMA funding that was not included in the Fiscal Plan. CDBG will provide cost-sharing for the remaining 5%. 

In the long term, PREPA, based on the Fiscal Plan, is forecast to spend $207M in Transmission and Distribution Capex in FY35.

Benchmarking PREPA against comparable utilities suggests that they may need to spend an additional ~$93M4increasing to ~$125M 

annually between FY35 and FY51, respectively

Reduction in PREPA Residential Customers/Households:

The June 2022 Fiscal Plan forecast a population reduction of ~11% from FY 2024 – 2038 and the corresponding gross load decline. 

However, the Integrated Resource Plan, the basis of the generation PREPA Fiscal Plan, does not project a decrease in the number of 

residential customers. It is likely given population decline that there will be a decline in number of customer/households. This would further 

increase SOW due to the gap in covering the shortfall in fixed cost recovery. FOMB demographer’s preliminary projections project a 7.9% 

decline in residential households in FY 2038 relative to June 2022 Fiscal Plan projections. 

B

1. Revenue requirement calculated from June 2022 Fiscal Plan as Fuel, Purchase Power, CILT Rider, Subsidies Rider, Non-fuel & PP O&M

2. Historical CILT consumption and contra revenues provided by LUMA, and CILT revenues sourced from June 2022 Fiscal Plan

3. From 5.7% SOW in 2035 under FOMB proposal

4. See Page 6 and Page 9 for methodology

5. Bad debt expense as a % of Total Electricity Sales in 2022 June Fiscal Plan set to 1.33% based on lowest bad debt level in past 5 years (FY2020, June 2022 Fiscal Plan)

6. FERC Form 1, 2021

x Quantified impact to follow

Collection shortfall: 

PREPA Fiscal Plan forecasts bad debt expenses to drop from an average of 2.31% between FY17 and FY22 to 0.5% by FY37. Weighted 

average of a sample of mainland utilities shows a bad debt as a percent of total expenditure of 0.56%6. If PREPA achieves its best 

performance of limiting bad debt in the last 5 years of 1.33%, the gap to 0.5% in FY38 will be an impact of $20 - 30M5 

C

Several risks have been identified that can meaningfully impact the future cost forecasts presented in the June 2022 Fiscal 

Plan

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 23 of 39
6

Pre-Decisional | Privileged & Confidential Draft | Analysis Subject to Material Change

DRAFT – HIGHLY PRELIMINARY ATTORNEY-CLIENT PRIVILEGE – CREATED AT REQUEST OF LEGAL COUNSEL

The presentation and issues identified by the bondholders do not consider any risks to the system and 

do not attempt to size or outline the impact the risks may pose to the SOW or the system (2/3)

Several risks have been identified that can meaningfully impact the future cost forecasts presented in the June 2022 Fiscal 

Plan

1. Revenue requirement calculated from June 2022 Fiscal Plan as Fuel, Purchase Power, CILT Rider, Subsidies Rider, Non-fuel&PP O&M

3. From 5.7% SOW in 2035 under FOMB proposal

4. Load loss in FY18 compared to FY17 was ~30% primarily due to the outages related to Hurricane Irma and Maria (Source – PREPA FISCAL PLAN 2018)

5. https://intelligenteconomics.com/median-household-income-increased-by-12-1-over-the-last-decade/

6. May 2021 PREPA Fiscal Plan

Operational improvement:

If LUMA fails to implement projected annual cost savings of $156M by FY25 through operational improvements, rates may need to increase to cover costs. 

LUMA originally forecast a savings of $59.4M6in FY23 in their projection in the May 2021 Fiscal Plan; they no longer forecast those savings to be delivered in 

FY23 based on the June 2022 Fiscal Plan

F

Storm event:

Another storm event will cause lost revenues and repair costs, not all of which are reimbursed by FEMA, therefore will require higher rates to cover; e.g., Maria 

led to a load loss of ~30%4 which led to reduced revenues compared to the previous year and higher losses

G

Quantified impact to follow

x

Fuel volatility:

If fuel remains at current levels or there are future spikes, rates could increase or decrease compared to the fiscal plan projections. Over 13 years, 

between 2008 and 2021, fuel prices swung between +40% and -44%. Similar fluctuations in the future could have a positive or negative impact on 

customer bills. In FY38, PREPA is forecast to spend over $500M in Fuel expenditure

E

Elasticity and Load Defection:

If load defection driven by the debt charges imposed (refer to Rate Structure Model for exact calculations) is higher than assumed in the fiscal plan due to 

higher distributed generation, energy efficiency, and technology adoption or more elastic consumer behavior due to high prices, revenues are likely to decrease, 

and rates may have to be increased to cover fixed costs

D

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 24 of 39
7

Pre-Decisional | Privileged & Confidential Draft | Analysis Subject to Material Change

DRAFT – HIGHLY PRELIMINARY ATTORNEY-CLIENT PRIVILEGE – CREATED AT REQUEST OF LEGAL COUNSEL

The presentation and issues identified by the bondholders do not consider any risks to the system and 

do not attempt to size or outline the impact the risks may pose to the SOW or the system (3/3)

x

Rates impact, FY 2038, c/kWh

1. See page 6 and 9

2. Bad debt expense as a % of Total Electricity Sales in 2022 June Fiscal Plan set to 1.33% based on lowest bad debt level in past 5 years (FY2020, June 2022 Fiscal Plan)

Key assumptions

Fixed cost shortfall recovery due to reduced consumption: Customers have an elasticity of -1.7 in the long 

run (2034 – 2051), resulting in shortfall in covering fixed operating costs due to lower consumption than 

projected in the June 2022 Fiscal Plan

Expected capex: PREPA will need to spend between ~$92M and ~$125M annually and in FY38 it will be ~$95 

- $100M in addition to the Fiscal Plan in line with historical spend in comparable utilities in the US1

Fixed cost shortfall recovery 

due to customer decline

Collections shortfall

Risk-adjusted 

required revenue

Required revenue 

in Fiscal Plan

Expected capex

Fixed cost shortfall 

recovery due to 

reduced consumption

29.6

0.9

0.3

0.2

0.8

31.9

Collections shortfall: Uncollectible revenue as a percent of Revenues from Sales of Electricity remain closer to 

historical averages (FY2017A - FY2023B average was 2.2%) at 1.33% rather than dropping to 0.5% as 

projected the June 2022 Fiscal Plan2

A

B

C

D

Fixed cost shortfall recovery due to customer decline: Residential customers are 7.9% lower in FY 2038 

relative to the June 2022 Fiscal Plan, with households dropping 0.1% from FY2024 to FY2038; there is no 

change to commercial or industrial customer estimates

In FY 2038, SOW could increase from 5.33% to 5.69% if these risks materialize

SOURCE:20221129_SOW_Risk considerations_Mediation Tab:Quantified risks summary 

Risks such as potential capex related to cost share requirements, fixed cost shortfall due to elasticity and population decline 

could further increase revenue required rates and implied share of wallet

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 25 of 39
Exhibit B 

 

Bond Parties Materials 

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 26 of 39
PREPA

BONDHOLDER MEDIATION PRESENTATION

NOVEMBER 2022 | DRAFT | SUBJECT TO FRE 408 & MEDIATION PRIVILEGE

Case:17-03283-LTS Doc#:24535-6 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 27 of 39
PREPARED AT THE DIRECTION OF COUNSEL | SUBJECT TO MEDIATION PRIVILEGE | SUBJECT TO FRE 408 AND SIMILAR RULES 2

Executive Summary

Difference between FOMB and creditors in terms of cost to consumer is negligible

Primary Changes to FOMB Proposal Notes

Bond Terms

Creditor bond terms of 73.9% in 6.625% bonds instead of 71.65% 

of 6% bonds requires a truly minor difference in electricity rates

 Can be satisfied through a 5.06% difference in upfront charge, or 

a 0.44% annual growth rate to the Board’s charge, or alternate 

mechanisms at Board’s discretion

 Represents small difference in share of wallet (“SoW”), as 

discussed further herein

Commonwealth Contribution

Creditors have asked for a Commonwealth contribution of $446M 

in the form of $171M of fees and expense reimbursement, and 

$275M in recovery

 Commonwealth has $6.1bn(1) in its main Treasury Account and 

$17.4bn(2) across its various bank accounts. In addition, the CW 

fiscal plan projects the CW will generate hundreds of millions per 

year in annual surplus 

 Bondholders also open to alternative forms of Commonwealth 

contribution, including the annual funding of a bond 

Reduction in GUC Claims Reserve

Excess value that the Board has already reserved and set aside 

for GUCs should be made available to the bonds to the extent 

GUC claims come in lower than the reserve amounts

 Costs the Board and Puerto Rico nothing incremental relative to 

the Board’s own affordability analysis and existing reserves for 

creditor distributions

(1) Puerto Rico TSA Report (Nov. 11)

(2) Summary of Bank Account Balances for the Government of Puerto Rico and its Instrumentalities (as of 9/30/22)

Case:17-03283-LTS Doc#:24535-6 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 28 of 39
PREPARED AT THE DIRECTION OF COUNSEL | SUBJECT TO MEDIATION PRIVILEGE | SUBJECT TO FRE 408 AND SIMILAR RULES

13,000

13,500

14,000

14,500

15,000

15,500

16,000

16,500

17,000

FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27

Aug 2018 Fiscal Plan June 2019 Fiscal Plan June 2020 Fiscal Plan May 2021 Fiscal Plan June 2022 Fiscal Plan Actual Load

3

PREPA and the FOMB have a history of negative bias in forecasting PREPA results and mistakenly viewing temporary 

operational and financial challenges as permanent

Persistent Negative PREPA Bias

 On March 8, 2022, governor Pierluisi terminated the PREPA RSA citing higher crude oil prices and higher inflation as key considerations. Today the 

price of crude oil is ~36%(1) lower than when the governor made this statement with both variables projected to decline further

 Going back to 2018 each PREPA Fiscal Plan posited significant and immediate declines in Commonwealth electric consumption. In reality, 

Commonwealth electric consumption remained flat or increased each year. Rather than acknowledging a negative forecast bias the government and the 

FOMB merely shifted successive load forecasts progressively higher without changing the steep projected electric consumption declines

 Today, the government and the FOMB are highlighting electric affordability as a key concern driving their restructuring proposal. However, any 

assertions and projections about affordability must be questioned in light of the government and the FOMB’s persistent negative forecast bias

PREPA Fiscal Plan Net Utility Sales (GWh)

Sources: PREPA Fiscal Plan, Bloomberg

(1) Brent crude oil prices as of 11/28/22 and 3/8/22

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 29 of 39
PREPARED AT THE DIRECTION OF COUNSEL | SUBJECT TO MEDIATION PRIVILEGE | SUBJECT TO FRE 408 AND SIMILAR RULES

Summary of Differences Between the Proposals

4

The difference in monthly bills between the two proposals as a percentage of monthly income is small and not sensitive to 

changes in assumptions

Difference in monthly bills as a percentage of monthly income

2024 2025 2026 ... 2038 2039 2040

Slide deck proposal (as presented) 0% 0.017% 0.034% ... 0.200% 0.211% 0.221%

Income = $21,400

Consumption = ~490kWh

FOMB "work in progress" analysis 0% 0.017% 0.033% ... 0.202% 0.213% 0.224%

Income = $21,333

Consumption = Undisclosed

AG Correction 0% 0.015% 0.031% ... 0.186% 0.196% 0.206%

Income = $22,879

Consumption = 417kWh

Maximum Difference 0% 0.017% 0.034% ... 0.202% 0.213% 0.224%

Minimum Difference 0% 0.015% 0.031% ... 0.186% 0.196% 0.206%

Case:17-03283-LTS Doc#:24535-6 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 30 of 39
PREPARED AT THE DIRECTION OF COUNSEL | SUBJECT TO MEDIATION PRIVILEGE | SUBJECT TO FRE 408 AND SIMILAR RULES

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

FOMB SoW Bondholders SoW McKinsey SoW Threshold Total Shelter Cost Analysis SoW Threshold

AG Replication of FOMB SoW Analysis

5

As described in previous affordability presentations, bondholders do not agree with McKinsey’s use of 6% SoW threshold. 

However, even adopting that framework for purposes of discussion, the differences between the two proposals in terms of 

SoW and monthly bills is small

 The differences between the two proposals in terms 

of SoW ranges from 0.02% in 2025 to 0.22% in 2040

 In terms of monthly bills, the difference grows from 

$0.31 (or 0.2%) in 2025 to $5.08 (or 4.1%) by 2040

 In real terms, the difference is $3.94 in 2040

 Note that elasticity assumption is included 

only for FOMB proposal because that is the 

only one that was provided

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 31 of 39
PREPARED AT THE DIRECTION OF COUNSEL | SUBJECT TO MEDIATION PRIVILEGE | SUBJECT TO FRE 408 AND SIMILAR RULES

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

FOMB SoW Bondholders SoW McKinsey SoW Threshold Total Shelter Cost Analysis SoW Threshold

AG Replication of FOMB’s “Work in Progress” SoW Analysis

6

 The differences between the two proposals in terms 

of SoW ranges from 0.02% in 2025 to 0.22% in 2040

 In terms of monthly bills, the difference grows from 

$0.30 (or 0.2%) in 2025 to $5.13 (or 3.9%) by 2040

 In real terms, the difference is $3.98 in 2040

As described in previous affordability presentations, bondholders do not agree with McKinsey’s use of 6% SoW threshold. 

However, even adopting that framework for purposes of discussion, the differences between the two proposals in terms of 

SoW and monthly bills is small

 Note that elasticity assumption is included 

only for FOMB proposal because that is the 

only one that was provided

Case:17-03283-LTS Doc#:24535-6 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 32 of 39
PREPARED AT THE DIRECTION OF COUNSEL | SUBJECT TO MEDIATION PRIVILEGE | SUBJECT TO FRE 408 AND SIMILAR RULES

SoW Analysis Using Corrected Income and kWh Assumptions

7

Corrected assumptions result in a much lower SoW for both proposals, with small differences between them

 CORRECTION 1: The FOMB analysis assumes median household income in 2024 is $21,333. However, according to the 2020 Census Bureau data, median income 

was $21,058 in 2020. Growing it by the Fiscal Plan’s inflation projection, results in income of $22,879 in 2024

 CORRECTION 2: The FOMB analysis assumes median household consumption of 444kWh in 2024. However, according to the 2019 Puerto Rico Community Survey, 

median household consumption was 373kWh in 2019. Growing it by the Fiscal Plan’s load growth rate projection, results in monthly consumption of 414kWh in 2024

 These two corrections generate SoWs that are below the FOMB’s 6% threshold from 2025 onwards

 The differences between the two proposals in terms of SoW ranges from 0.02% in 2025 to 0.21% in 2040

 In terms of monthly bills, the difference is $0.30 (or 0.3%) in 2025 and $5.06 (or 4.3%) in 2040. In real terms, the difference is $3.93 in 2040

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

FOMB SoW Bondholders SoW McKinsey SoW Threshold Total Shelter Cost Analysis SoW Threshold

 Note that additional assumptions are not included, but would further reduce SoW:

1. Adjustment for informal sector activity;

2. Growth in nominal wages in 2021;

Note that elasticity assumption is not included

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 33 of 39
Appendix

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 34 of 39
PREPARED AT THE DIRECTION OF COUNSEL | SUBJECT TO MEDIATION PRIVILEGE | SUBJECT TO FRE 408 AND SIMILAR RULES

November 30th Proposal

Exchange Ratio  73.9% of petition claim (56% of accrued claim) in new tax-exempt revenue bonds (the “Bonds”) based on current 

estimated claims pool(1)

 Bonds to receive all cash flows / bonds that are freed up out of current FOMB set-aside for general unsecured claims 

and administrative expense claims

 Subject to diligence on current claims reserve and subject to current bondholders obtaining some measure of control 

over claims resolution process

Connectivity Charge  FOMB to determine necessary rates needed to support bond terms such that bond has expected maturity of 35 – 40 

years, subject to reasonable creditor agreement

Volumetric Charge  FOMB to determine necessary rates needed to support bond terms such that bond has expected maturity of 35 – 40 

years, subject to reasonable creditor agreement

Bond Structure  Bonds to receive payment from cash flows generated by connectivity fixed charges and volumetric charges

 Both charges will be used to turbo amortize bonds

Coupon  6.625%

Bond Call Provision  Non-callable for 15 years; callable at par thereafter

 Bonds shall include a “tax call” provision to the extent necessary

Maturity  35 – 40 year expected maturity; final maturity of 50 years; interest continues to accrue until bonds pay in full

Tax Status  Tax-exempt

Security  Lien on gross revenues

DSRF  None

Payment Default  No default on bonds for failure to pay debt service prior to maturity as long as debt service charge is calculated, 

assessed, and collected as required and is used to pay debt service

 If there is a federal disaster that causes non collection of bills for 6 months, then PREPA may choose to defer debt 

service for up to six months. If deferred, then interest will accrete until paid and maturity will be extended

 Accept true up on interest but interest shall continue to accrue and accrete on overdue principal and interest at original 

coupon rate until bonds are paid in full

9

November 30th Proposal

(1) Cash flows for other creditors assumed to be left unchanged relative to FOMB proposal

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Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 35 of 39
PREPARED AT THE DIRECTION OF COUNSEL | SUBJECT TO MEDIATION PRIVILEGE | SUBJECT TO FRE 408 AND SIMILAR RULES

November 30th Proposal

Series A CVI  5.05% of petition claim in Series A CVI

 13% coupon, or subject to cap that accretes at 13%

 Once Bonds are repaid, all cash flows from the connectivity fixed charges and volumetric charges go to repay the Series 

A CVI

 Series A CVI to remain outstanding for 50 years (or until fully repaid)

 Call structure TBD

 Tax status to be discussed

Series B CVI  21.05% of petition claim in Series B CVI

 13% coupon, or subject to cap that accretes at 13%

 2/3 of cost savings generated from load outperformance expense reduction relative to the 2022 Fiscal Plan projections 

(see next page for further detail)

 Series B CVI to remain outstanding for 50 years (or until fully repaid)

 Call structure TBD

 Tax status to be discussed

Additional Terms  Structuring of charges and subsidies to be acceptable to creditors

 Legal protections per prior proposals

 Recovery allocated between and among bondholders based on accrued claim through confirmation

 Deemed issuance date upon signing of RSA, with interest accrual funded by implementation of an interim charge that is 

approved by PREB

Fees and Cash 

Contribution

 Consummation Costs: 3% of prepetition claims held by the AHG, National, Assured, and Syncora, payable in cash only 

to those parties

 $275mm cash contribution from the Commonwealth

10

November 30th Proposal

Case:17-03283-LTS Doc#:24535-6 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 36 of 39
PREPARED AT THE DIRECTION OF COUNSEL | SUBJECT TO MEDIATION PRIVILEGE | SUBJECT TO FRE 408 AND SIMILAR RULES 11

Series B CVI Construct

The Series B CVI construct provides a sharing mechanism for any expense savings for PREPA customers

 Exhibit 50 of the 2022 Fiscal Plan (the “Plan”) provides the consolidated forecasted expenses trough FY 2038

 These expenses are shown on a $ basis in the exhibit, but are paid by customers as a c/kWh charge

 The amount an individual customer pays is dependent on their energy consumption (or load), but can also change based on variances of total energy consumption across all 

customers relative to the Plan

 To the extent that load outperforms the Plan, the required c/kWh charge required to meet expenses will be lower

 To the extent that c/kWh charge for expenses are lower than projected, due to higher-than-expected load, 2/3 of the net cost savings relative to the Plan will be allocated to the 

Series B CVI

 The remaining savings will be retained by PREPA or passed along to the customers

 All costs at PREPA that flow through to customers bills (except for Non-Renewable Fuel; see exhibit below) are included in the calculation to determine this allocation to Series B 

CVI

 Debt service costs, which are included, are still to be determined

 Series B CVI evaluated relative to fiscal plan base case load forecast. If the Board prefers to evaluate load performance relative to the alternative case in the fiscal plan, the 

alternative case must also be used in sizing the amount of revenue bonds

Debt Service TBD

Overview

Implied c/kWh Charge – Consolidated Forecast Expenses 

Figures only shown through FY38 consistent with what is included in the 2022 Fiscal Plan. For avoidance of doubt, this CVI would remain outstanding for 50 years

Cost Forecast (Exhibit 50 - 2022 Fiscal Plan)

FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 FY 2035 FY 2036 FY 2037 FY 2038

Pension 182 277 281 284 287 289 293 295 298 300 301 300 298 295 292

CILT & Subsidy 366 276 267 261 260 260 262 263 262 263 266 269 271 270 273

Non-Labor / Other Operating 603 524 377 378 382 383 384 386 389 386 377 379 376 373 368

Labor Operating 318 303 305 308 312 315 319 323 327 327 324 327 326 325 325

Necessary Maintenance Expenses 232 227 225 228 231 234 237 240 243 238 223 227 230 233 237

Renewable PPAs 126 343 705 1,086 1,158 1,169 1,179 1,200 1,218 1,218 1,218 1,218 1,221 1,218 1,218

Conventional PPAs 484 494 479 477 280 138 141 144 148 154 160 163 167 170 174

Debt Service Cost

Total ($mm) $2,311 $2,444 $2,639 $3,022 $2,910 $2,788 $2,815 $2,851 $2,885 $2,886 $2,869 $2,883 $2,889 $2,884 $2,887

June 2022 Fiscal Plan 16,212 15,222 14,752 14,325 13,929 13,530 13,204 12,896 12,553 12,059 11,680 11,337 10,960 10,603 10,332

Implied c/kWh 14.3 16.1 17.9 21.1 20.9 20.6 21.3 22.1 23.0 23.9 24.6 25.4 26.4 27.2 27.9

1.0% Annual Load Decline 15,954 15,795 15,637 15,480 15,325 15,172 15,020 14,870 14,722 14,574 14,429 14,284 14,141 14,000 13,860

Cash for Series B CVI (1.0% Load Decline) $0 $61 $106 $162 $195 $226 $258 $291 $332 $402 $450 $500 $559 $616 $657

1.5% Annual Load Decline 15,793 15,556 15,323 15,093 14,867 14,644 14,424 14,208 13,995 13,785 13,578 13,374 13,174 12,976 12,781

Cash for Series B CVI (1.5% Load Decline) $0 $36 $68 $108 $131 $153 $173 $194 $221 $275 $311 $345 $389 $430 $456

Case:17-03283-LTS Doc#:24535-6 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 37 of 39
PREPARED AT THE DIRECTION OF COUNSEL | SUBJECT TO MEDIATION PRIVILEGE | SUBJECT TO FRE 408 AND SIMILAR RULES 12

FOMB Advisor Assumptions Exaggerate Cost of Bondholder Proposal

Assumption Bondholder (B/H) Proposal FOMB Assumptions / Interpretation of 

Bondholder Proposal

Increase in Avg. 

c/kWh over 50 Years

% Increase to 

B/H Proposal(1)

Load Post-2051  Assumes that load remains flat post2051

 Assumption made to ensure consistency 

with FOMB, as advisors had repeatedly 

said they assume load to be flat post 

projection period

 Assumes an ~1.5% annual decline in load post2051, contrary to the Fiscal Plan

 Directly contradicts what FOMB and their 

advisors told bondholders previously

 Directly contradicts FOMB argument that load 

projection must remain flat post-2051 for the 

CVI baseline

0.5 8.4%

Interest Accrual  Assumes implementation of interim 

charge to fund any interest accrual

 Paid through issuance of additional bonds

 Despite assuming that RSA is signed sometime 

in the coming weeks and the new bonds are 

issued on July 1, 2023, assumes that interest 

accrues for a full year

 Assumes no implementation of an interim 

charge (not even the 1 c/kWh previously 

proposed), so interest accrual (which is also 

overstated based on timing) must be paid 

entirely through issuance of additional bonds

0.8 12.8%

Consummation 

Fee and CW 

Contribution

 Assumes $446mm in total fees and CW 

Contribution paid in cash upon 

consummation of the RSA

 No cash is available

 Paid through issuance of additional bonds

0.9 13.9%

Other Creditors  Cash Flows proposed by FOMB to the 

“Other Creditors” should be unchanged 

regardless of treatment of the AHG

 Other Creditors receive enhanced economics 

and higher principal recovery totaling >$1bn of 

cashflows more than FOMB originally proposed 

0.4 6.1%

Total Overstatement of Proposal Cost ~2.5 c/kWh ~41.1%

The FOMB’s advisors took an aggressive approach in interpreting the bondholder proposal, using inconsistent and counterintuitive assumptions, 

resulting in a significant overstatement of the cost of the proposal and exaggerating the economic distance from the FOMB’s proposal

 The impacts of the differences in assumptions shown above are approximate and were calculated assuming annual fixed and volumetric charge increases in order to 

solve for a 40-year maturity on the bonds

 Bondholders have previously demonstrated flexibility on rate design, noting that they are open to increasing the charges annually, initially, or some combination of 

both, as a long as a 35-40 year expected maturity on the bonds can be achieved

(1) Bondholder proposal assumes 73.9% conversion rate, 6.625% coupon, and 0.44% annual increase in fixed and volumetric charges, resulting in an average charge over 50 years of ~6.2 c/kWh 

Case:17-03283-LTS Doc#:24535-6 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 38 of 39
PREPARED AT THE DIRECTION OF COUNSEL | SUBJECT TO MEDIATION PRIVILEGE | SUBJECT TO FRE 408 AND SIMILAR RULES 13

Case:17-03283-LTS Doc#:24535-6 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 06 PREPA Proposal to Bondholder Group Page 39 of 39