LI

Hearing Date: February 15, 2018 at 9:30 a.m. (Atlantic Standard Time)

Objection Deadline: February 1, 2018 at 5:00 p.m. (Eastern Standard Time)

UNITED STATES DISTRICT COURT

DISTRICT OF PUERTO RICO

-------------------------------------------------------------x

In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO,

 as representative of 

THE COMMONWEALTH OF PUERTO RICO, et al.

 Debtors.1

-------------------------------------------------------------x

PROMESA

Title III

No. 17 BK 3283-LTS

(Jointly Administered)

In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO,

 as representative of 

PUERTO RICO ELECTRIC POWER AUTHORITY 

(“PREPA”), 

 Debtor.

-------------------------------------------------------------x

PROMESA

Title III

No. 17 BK 4780-LTS

Court Filing Relates Only to PREPA 

and Shall Only be Filed in Case No. 

17-BK-4780 (LTS) and Main Case 

17-BK-3283 (LTS)

SUPPLEMENTAL DECLARATION OF TODD W. FILSINGER IN SUPPORT 

OF URGENT JOINT MOTION OF THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO AND THE PUERTO RICO FISCAL 

AGENCY AND FINANCIAL ADVISORY AUTHORITY FOR ENTRY OF INTERIM 

AND FINAL ORDERS (A) AUTHORIZING POSTPETITION SECURED FINANCING, 

(B) GRANTING PRIMING LIENS AND PROVIDING SUPERPRIORITY 

ADMINISTRATIVE EXPENSE CLAIMS, (C) MODIFYING THE AUTOMATIC STAY, 

(D) SCHEDULING A FINAL HEARING, AND (E) GRANTING RELATED RELIEF

 1 The Debtors in these Title III Cases, along with each Debtor’s respective Title III case number 

listed as a bankruptcy case number due to software limitations and the last four (4) digits of 

each Debtor’s federal tax identification number, as applicable, are the (i) Commonwealth of 

Puerto Rico (Bankruptcy Case No. 17 BK 3283-LTS) (Last Four Digits of Federal Tax ID: 

3481); (ii) Puerto Rico Sales Tax Financing Corporation (“COFINA”) (Bankruptcy Case No. 

17 BK 3284-LTS) (Last Four Digits of Federal Tax ID: 8474); (iii) Employees Retirement 

System of the Government of the Commonwealth of Puerto Rico (“ERS”) (Bankruptcy Case 

No. 17 BK 3566-LTS) (Last Four Digits of Federal Tax ID: 9686); (iv) Puerto Rico Highways 

and Transportation Authority (“HTA”) (Bankruptcy Case No. 17 BK 3567-LTS) (Last Four 

Digits of Federal Tax ID: 3808); and (v) Puerto Rico Electric Power Authority (“PREPA”) 

(Bankruptcy Case No. 17 BK 4780 (LTS)) (Last Four Digits of Federal Tax ID: 3747).

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Exhibit D - Filsinger Supplemental Declaration Page 1 of 18
Pursuant to 28 U.S.C. § 1746, I, Todd W. Filsinger, hereby declare as follows under 

penalty of perjury under the laws of the United States of America: 

1. I am a Senior Managing Director of Filsinger Energy Partners (“FEP”). I 

currently serve as the Chief Financial Advisor (“CFA”) to the Puerto Rico Electric Power 

Authority (“PREPA” or the “Debtor”), and I report to its Governing Board. The scope of my 

responsibilities for the Debtor is set forth in my Declaration [Dkt. No. 2298-3].

2. I submit this Supplemental Declaration (the “Supplemental Declaration”) in 

support of the Reply in Support of the Urgent Joint Motion of the Financial Oversight and 

Management Board for Puerto Rico and the Puerto Rico Fiscal Agency and Financial Advisory 

Authority for Entry of Interim and Final Orders (A) Authorizing Postpetition Secured Financing, 

(B) Granting Priming Liens and Providing Superpriority Administrative Expense Claims, (C) 

Modifying the Automatic Stay, (D) Scheduling a Final Hearing, and (E) Granting Related Relief

(the “Postpetition Financing Motion”)2 filed by the Oversight Board, as the Debtor’s 

representative pursuant to section 315(b) of the Puerto Rico Oversight, Management, and 

Economic Stability Act (“PROMESA”),3 and AAFAF, as the entity authorized to act on behalf of 

PREPA pursuant to the authority granted to it under the Enabling Act of the Fiscal Agency and 

Financial Advisory Authority, Act 2-2017. 

3. Except as otherwise indicated, all facts and opinions set forth herein are based 

upon: (i) my personal knowledge; (ii) my review of relevant documents provided to me, 

including documents provided by AAFAF, the Debtor and their respective professionals and 

employees; (iii) information supplied to me by employees of FEP with whom I work in the 

 2 Defined terms used but not defined herein shall have the same meanings given to them in the 

Postpetition Financing Motion.

3

 PROMESA is codified at 48 U.S.C. §§ 2101-2241.

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Exhibit D - Filsinger Supplemental Declaration Page 2 of 18
ordinary course of business; and (iv) my experience and knowledge of the Debtor and its 

financial condition.

UPDATED BUDGET

4. To comply with the Court’s Order, I hereby submit a current and updated budget 

(“Updated Budget”) which projects the Debtor’s cash flow for 14 weeks (the “Updated Budget 

Period”). The Updated Budget, attached hereto as Exhibit A, updates the Weekly Cash Flow 

Projection submitted in support of the Postpetition Financing Motion. The Urgent Budget 

reflects actual results through January 26, 2018 and the receipt of funds received from certain 

Central Government Agencies on January 29, 2018. These payments include approximately $24 

million of past due amounts and a pre-payment of approximately $50 million for estimated 

electrical service provided to the Central Government Agencies. The majority of the $50 million 

pre-payment was included in the Weekly Cash Flow Projection but was spread throughout the 

projected time period. The Updated Budget reflects the receipt of those funds during the week 

ending February 2 and further reflects corresponding reductions to the collections line item 

throughout the Updated Budget Period. The Debtor does not believe that the Central 

Government Agencies owe any material amounts to the Debtor for electric services for the 

current fiscal year.

5. As a result of these payments by the Central Government Agencies and continued 

aggressive cash management practices, the Debtor believes it can continue to operate to the week 

ending February 16, 2018 without an infusion of cash from financing. The Updated Budget, 

however, indicates that the Debtor’s cash position on February 16, 2018 will be very low and 

that during the week ending February 23, 2018, the Debtor’s cash position will be such that the 

Debtor will find it difficult to sustain its operations. In addition, in order to maintain sufficient 

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cash to operate the system, the Debtor will operate the system without customary redundancies 

thereby making it more vulnerable to outages and service issues.

ADDITIONAL SOURCES OF RECEIPTS

6. In response to the Court’s Order, I have identified and quantified four additional 

sources of receipts that are not otherwise identified on the Updated Budget. The first is potential 

insurance claims by the Debtor for damage caused by Hurricane Maria. The Debtor has been 

engaged in communications with insurers regarding its claims, and the insurers recently sent the 

Debtor a letter reserving its rights on any claims. The letter is attached hereto as Exhibit B. For 

the reasons identified in Exhibit B and other reasons, the Debtor does not expect to recover any 

money associated with its claims during the Updated Budget Period. 

7. The second potential source of receipts relates to additional FEMA 

reimbursements in excess of the reimbursements already incorporated into the Emergency 

Related section of the Updated Budget, of which there are four possible reimbursements. 

a. One concerns payments made to XGL for services provided in the Debtor’s 

restoration process. A project worksheet (“PW”) has been submitted to FEMA in the 

amount of approximately $20 million. The Debtor and XGL are embroiled in a dispute 

over payment, and XGL is holding the Debtor’s property. FEMA has informed me that it 

will not consider reimbursing the Debtor for payments to XGL until the current dispute 

between the Debtor and XGL is resolved. The Debtor does not expect to resolve the 

dispute with XGL and obtain reimbursement from FEMA during the Updated Budget 

Period. 

b. The second potential reimbursement from FEMA relates to fuel expenditures. 

The Debtor expects to submit a PW for this potential expenditure within two weeks. 

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Because the PW is not completed, the Debtor does not know the amount of the possible 

reimbursement and does not anticipate receiving a reimbursement for this expenditure 

during the Updated Budget Period. 

c. The third potential reimbursement from FEMA relates to employee overtime 

expenditures. The Debtor received a reimbursement of approximately $48 million from 

FEMA for employee overtime in December 2017. Since that time, the Debtor has 

incurred additional employee overtime expenditures, but there is a current dispute with 

FEMA relating to the employee overtime payment made in December. The Debtor, 

therefore, does not expect to submit a PW for additional employee overtime expenses 

within two weeks. Because the PW is not completed and the dispute exists over the prior 

submission to FEMA for these types of expenditures, the Debtor does not know the 

amount of the possible reimbursement and does not anticipate receiving a reimbursement 

for this expenditure during the Updated Budget Period. 

d. The fourth potential reimbursement from FEMA relates to the reimbursement of 

the $25 million deductible amount on the Debtor’s property and casualty insurance 

policy. A PW has been forwarded to FEMA for this amount, but the Debtor does not 

know the timing of the possible reimbursement and does not currently anticipate 

receiving a reimbursement for this expenditure during the Updated Budget Period.

8. The third potential source of receipts relates to collections from public 

corporations. Unlike the Central Government Agencies that prepaid for electric services, public 

corporations maintain separate treasury accounts. According to the Debtor’s records as of 

December 31, 2017 ( the accuracy of which has not been confirmed), public corporations owe 

the Debtor approximately $233 million, $169 million of which are comprised of receivables over 

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120 days. In my experience, receivables aged over 120 days are extremely difficult to collect. In 

addition, I understand that many of the public corporations dispute a significant percentage of 

invoices which form the basis of the receivables. I also understand that many public 

corporations (like the Debtor) are experiencing critical liquidity problems which preclude their 

ability to pay current debts, much less significantly aged debts. For these reasons, the Debtor 

does not project to receive any payments on these receivables during the Updated Budget Period. 

Notwithstanding the low probability of success, through the significant assistance of AAFAF, the 

Debtor has scheduled meetings on February 5 and 6, 2018 with the nine public corporations that 

owe the Debtor the most money in an attempt to collect funds.

9. The fourth potential source of receipts relates to possible pre-payments by large, 

primarily industrial, customers. The Debtor has initiated discussions with a large industrial 

customer to explore the opportunity to accelerate payments by this customer perhaps in exchange 

for a significantly large discount in order to ease the Debtor’s liquidity crisis. The Debtor also 

intends to pursue similar opportunities with other large customers. Because it is difficult to 

project whether these efforts will succeed, the Debtor has no way of projecting whether it will 

receive pre-payments (and, if so, in what amounts), so these are not included in the Updated 

Budget.

10. In addition to potential sources of receipts, it is also important to note the 

significant possibility of negative cash variances which the Debtor might experience during the 

Updated Budget Period. Outages and other events may strain the Debtor’s already tenuous cash 

position. In addition, expenditures will be limited to only those that are absolutely necessary to 

operate the system, and there will be no cushion for unforeseen increases in fuel expenses, 

payments that must be made for restoration or service issues, or to address other supplier issues. 

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Finally, revenue collections may fall short of projections. None of these factors is projected in 

the Updated Budget, but all of them pose a risk to the Debtor’s cash position during the Updated 

Budget Period. 

OTHER PROJECTIONS

11. The Updated Budget does not reflect any actual collections or future collections 

from municipalities. This is because of an arrangement known as contribution in lieu of taxes or 

“CILT.” The Debtor provides electricity to municipalities, but the municipalities do not pay the 

Debtor for the electricity. In exchange, the Debtor does not pay otherwise applicable taxes to the 

municipalities. The Debtor recoups the costs of the electricity through an 11% surcharge on fuel 

costs. The Debtor’s books reflect an asset of $1.4 billion attributed to a purported receivable 

from municipalities on account of the electricity provided by the Debtor to the municipalities and 

a corresponding liability of $1.4 billion attributed to the Debtor’s tax liability to the 

municipalities. My understanding is that the Debtor is not permitted under applicable law to 

attempt to recover the costs of the electricity it provides to the municipalities for non-commercial 

use. Moreover, I do not believe that, even if it could, the municipalities have funds available to 

pay the Debtor for the electricity the Debtor provides.

12. With respect to actual and projected fuel costs in the Updated Budget, the Debtor 

projects to spend $1.7 billion on these costs in fiscal year 2018, compared to a pre-hurricane 

budgeted amount of $1.9 billion. During the five-week period from the week ending January 19, 

2018, PREPA expended $155.8 million in fuel and power provider payments. If this amount is 

used to estimate an annual disbursement for these expenditures, the annual value is $1.6 billion. 

The estimated expenditures for fuel and power payments over the Updated Budget Period is 

$593 million. This projection includes payments of $140 million to fuel and power providers that 

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had been deferred under the aggressive cash management program that the Debtor implemented 

to maintain a positive cash position. When the $140 million deferred payment is removed from 

the Updated Budget, the projected fuel and power costs over the Updated Budget Period confirm 

that the annual value of the fuel and power provider payments is $1.7 billion, which is below the 

$1.9 billion budgeted for FY 2018 in the PREPA Fiscal Plan dated April 24, 2017.

[Space is intentionally left blank.]

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Exhibit D - Filsinger Supplemental Declaration Page 8 of 18
TCO 362892571v1

I declare under penalty of perjury under 28 U.S.C. § 1746 that the foregoing is true and 

correct.

Executed this 3d day of February, 2018 at _______________________________.

___________________________

Todd W. Filsinger

Denver,Colorado

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Exhibit D - Filsinger Supplemental Declaration Page 9 of 18
Exhibit A

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Puerto Rico Electric Power Authority ("PREPA")

13 Week Cash Flow Model

($ in millions) Actual Actual Actual Actual Actual 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Week ending 12/29 01/05 01/12 01/19 01/26 02/02 02/09 02/16 02/23 03/02 03/09 03/16 03/23 03/30 04/06 04/13 04/20 04/27 05/04 14 Weeks

Receipts

Customer collections $ 14.3 $ 24.6 16.5 $ 23.5 $ 28.5 $ $ 18.1 99.2 $ $ 17.2 17.9 $ 17.8 $ 17.6 $ 17.7 $ 18.6 $ $ 18.8 $ 20.8 $ 20.9 $ 28.0 $ 28.0 $ 371.8 31.2 $ 

Transfers from Emergency Account 47.8 - - - - - - - - - - - - - - - - - - - 

Insurance Proceeds - - - - - - - - - - - - - - - - - - - - 

Other - - - - - - - - - - - - - - - - - - - - 

Total Receipts $ 14.3 $ 24.6 64.2 $ 23.5 $ 28.5 $ $ 18.1 99.2 $ $ 17.2 17.9 $ 17.8 $ 17.6 $ 17.7 $ 18.6 $ $ 18.8 $ 20.8 $ 20.9 $ 28.0 $ 28.0 $ 371.8 31.2 $ 

Disbursements

Eligible Energy Purchases

Eligible Power purchase - AES $ 13.7 $ - - $ 13.7 $ $ 13.9 - $ $ 22.6 - $ 12.5 $ 12.5 $ $ 12.5 - $ $ - $ - $ 4.8 $ 3.6 $ 3.6 $ - $ 93.6 7.6 $ 

Eligible Power purchase - EcoElectrica - - - - - 24.1 - 26.5 - 28.4 - 28.8 - - 7.2 7.2 7.2 7.2 142.9 6.2 

Eligible Power purchase - Renewable sources - - - - - - - 11.3 - - - - - - - - - - 11.3 - 

Eligible Fuel purchase - Fleet and storage - 0.4 - 0.1 - 3.4 - - 1.5 - - 1.5 - - - 1.5 - - 7.9 - 

Eligible Fuel purchase - Freepoint - 9.2 4.6 4.4 9.0 9.0 4.4 9.2 4.4 4.6 9.6 10.0 23.1 9.6 22.7 4.9 29.0 16.4 9.7 166.4 

Eligible Fuel purchase - Puma 9.6 12.0 5.6 15.9 9.8 14.2 6.4 7.6 9.1 8.7 6.6 9.5 6.8 9.1 2.3 2.3 2.3 2.3 91.6 4.6 

Eligible LNG purchase - Fenosa - 13.9 - - - 16.0 - - - 11.1 15.1 - 4.6 4.6 4.6 4.6 6.3 6.3 79.4 6.3 

Subtotal Energy Purchases $ 23.3 $ 35.5 10.2 $ 28.0 $ 24.9 $ $ 58.9 32.5 $ $ 55.7 48.9 $ 36.9 $ 44.6 $ 48.6 $ 63.4 $ $ 23.3 $ 23.8 $ 41.9 $ 48.3 $ 25.4 $ 593.1 41.0 $ 

Other Disbursements

Eligible Estimated Payroll 7.8 7.8 - - 7.8 7.8 - 7.8 - - 7.8 - 7.8 - 7.8 - 7.8 - 54.6 7.8 

Eligible Social security 2.8 2.5 - - 2.4 2.0 - 2.0 - - 2.0 - 2.0 - 2.0 - 2.0 - 14.2 2.0 

Eligible Payroll taxes 0.6 0.6 - - 1.8 1.1 - 1.1 - - 1.1 - 1.1 - 1.1 - 1.1 - 7.7 1.1 

Eligible Contributions to employee benefit programs 5.0 5.3 - - 5.3 5.5 - 5.5 - - 5.5 - 5.5 - 5.5 - 5.5 - 38.5 5.5 

Eligible Medical benefit costs 1.0 9.0 3.8 - - 7.2 1.8 1.8 - - 5.8 - - - 5.8 - - - 28.2 5.8 

Eligible Workers compensation / disability funding - 3.4 - - - - - 6.0 - - - - - - - - - - 6.0 - 

Ineligible Estimated Gross Overtime 5.6 4.8 - - 3.0 3.5 - 3.5 - - 3.5 - 3.5 - 3.5 - 3.5 - 24.5 3.5 

Ineligible Contract Labor - Title III - 2.0 - - 0.3 1.5 1.5 1.5 1.5 1.5 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 24.7 1.9 

Eligible Contract Labor - Other - 0.0 - - - 0.4 0.4 0.4 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 6.8 0.5 

Employee Disbursements & Contract Labor $ 22.8 $ 35.4 3.8 $ $ 20.6 - $ $ 29.1 3.7 $ $ 29.6 1.9 $ $ 28.1 1.9 $ $ 22.3 2.4 $ $ 28.1 2.4 $ $ 22.3 2.4 $ $ 28.1 2.4 $ 205.1 $ 

Other Disbursements

Eligible Insurance premiums - 0.9 - - - - - - 0.1 - - 1.5 - - - 0.3 - - 2.0 - 

Eligible Maintenance Disbursements - 0.6 - 1.0 1.5 3.2 - 3.2 3.2 4.5 4.5 4.5 4.5 4.5 3.9 3.9 3.9 3.9 52.0 4.3 

Eligible Employee expense reimbursements - - - - - 0.4 - 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 5.2 0.4 

Eligible Additional accounts payable - 2.6 - 5.1 3.0 2.4 2.8 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4 34.0 2.4 

Eligible Other 2.3 (5.3) 4.2 (1.1) 1.2 - 3.2 - - - - - - - - - - - 3.2 - 

Subtotal Other Disbursements $ 2.3 $ (1.3) 4.2 $ $ 5.7 5.1 $ $ 6.0 $ 6.0 $ 6.2 $ 7.3 6.0 $ 7.3 $ 8.8 $ 7.3 $ $ 7.3 $ 6.7 $ 7.0 $ 6.7 $ 6.7 $ 96.4 7.1 $ 

Total Disbursements $ 48.4 $ 69.6 18.2 $ 33.1 $ 51.1 $ $ 94.0 42.2 $ $ 91.4 57.0 $ 46.1 $ 80.0 $ 59.8 $ 93.0 $ $ 33.0 $ 58.6 $ 51.4 $ 77.3 $ 34.5 $ 894.6 76.3 $ 

Net Cash Flow $ (34.0) $ (45.0) 46.0 $ $ (22.7) (9.6) $ $ (75.9) 57.0 $ $ (74.2) (39.1) $ (28.3) $ (62.4) $ (42.1) $ (74.4) $ $ (14.2) $ (37.8) $ (30.5) $ (49.4) $ (45.0) (6.5) $ (522.8) $ 

Opening Balance $ 242.2 $ 259.9 208.1 $ 219.9 $ $ 187.0 $ 187.5 $ 233.8 $ 118.8 157.9 $ $ 16.3 44.6 $ (46.1) $ (88.2) $ (162.6) $ $ (176.9) $ (214.7) $ (245.1) $ (294.5) $ (301.0) $ 187.5

Net Operating Cash Flows (34.0) (45.0) 46.0 (22.7) (9.6) (75.9) 57.0 (74.2) (39.1) (28.3) (62.4) (42.1) (74.4) (14.2) (37.8) (30.5) (49.4) (45.0) (6.5) (522.8) 

Proceeds Transferred to Restricted Accounts - 5.0 5.8 - - (10.8) - - - - - - - - - - - - (10.8) - 

Ending Balance, before Emergency Related $ 208.1 $ 219.9 259.9 $ 210.3 $ 164.3 $ $ 157.9 233.8 $ $ 118.8 $ 16.3 44.6 $ (46.1) $ (88.2) $ (162.6) $ $ (176.9) $ (214.7) $ (245.1) $ (294.5) $ (301.0) $ (346.1) (346.1) $ 

Emergency Related

Ineligible Emergency Spend $ (15.4) - $ $ (50.3) (9.7) $ $ (51.8) - $ (25.0) $ $ (44.5) (12.5) $ (44.5) $ (44.5) $ (44.5) $ (12.5) $ $ (12.5) $ (44.5) $ (32.0) $ (32.0) $ (114.0) - $ (514.8) $ 

FEMA Reimbursements 15.4 - 27.0 9.7 23.2 25.0 51.8 44.5 12.5 44.5 44.5 44.5 12.5 12.5 44.5 32.0 32.0 21.0 - 421.8 

Subtotal Other Disbursements $ - $ - $ (23.3) - $ $ 23.2 $ - $ - $ - $ - - $ - $ - $ - $ $ - $ - $ - $ - $ (93.0) - $ (93.0) $ 

Ending Balance $ 208.1 $ 219.9 259.9 $ 187.0 $ 187.5 $ $ 157.9 233.8 $ $ 118.8 $ 16.3 44.6 $ (46.1) $ (88.2) $ (162.6) $ $ (176.9) $ (214.7) $ (245.1) $ (294.5) $ (301.0) $ (439.0) (439.0) $ 

Privileged and Confidential - Working Draft Subject to Material Change - Professional's Eyes Only - Subject to 

Mediation - Agreement But Not Subject to any Cleansing Obligations Thereunder

DRAFT - Subject to Change

Confidential For Discussion Purposes Only

Confidential Information PREPA-AHBHG0010272

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Exhibit D - Filsinger Supplemental Declaration Page 11 of 18
Exhibit B

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120 Broadway, Suite 900

New York, NY 10271

T: (212) 267-2700

F: (212) 962-5360

January 23, 2018

Mr. Sammy Rodríguez Ortega

Risk Manager

Puerto Rico Electrical Power Authority

P.O. Box 364267

San Juan, Puerto Rico 00936-4267

Email: Sammy.rodriguez@prepa.com

Re: Puerto Rico Electrical Power Authority – PREPA

Various Locations

Carrier Policy # - Attachment “A”

VeriClaim# NYC17653660____________________

Hurricane Maria – September 20, 2017 (CAT 1745)

Dear Mr. Ortega:

We write on behalf of all Insurers subscribing to the contracts/slips listed on Attachment “A”

(“Insurers”). The Insurers alone make coverage determinations and have approved this letter.

The only authorized communications regarding coverage are those that have been expressly

approved by Insurers; Vericlaim, Inc. [VCI], RTS International Loss Adjusters, and any

consultants retained by them, have no authority to make any coverage determinations on behalf

of Insurers.

This letter concerns the claim of the Puerto Rico Electric Power Authority (“PREPA”) for loss

arising out of Hurricane Maria. We look forward to working with PREPA to cooperatively and

expeditiously calculate the amount of loss. Engineers at LIG Consultants recently visited Puerto

Rico to inspect damage to PREPA’s property, and planned to return this month. Accountants at

Matson Driscoll & Damico are in Puerto Rico and have requested certain documents to analyze

PREPA’s time element loss. In the interim, those Insurers listed on Attachment A subscribing

policies with shares up to $50,000,000 excess of the $25,000,000 deductible for Windstorm and

the 30-day business interruption waiting period have approved their several and proportionate

share of a net payment of $50,000,000 on an unallocated basis.

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Exhibit D - Filsinger Supplemental Declaration Page 13 of 18
PREPA

DOL: 9/20/17

Page 2 of 6

As the claim is being further analyzed, Insurers quote below certain provisions of the policies in

effect from May 15, 2017 to May 15, 2018 (“Policies”) that may affect coverage for PREPA’s

loss. The quotation of some provisions of the Policies does not constitute a waiver of any other

provision.

PUERTO RICO ELECTRIC POWER AUTHORITY

PROPERTY AND BUSINESS INTERRUPTION INSURANCE

1. INSURING AGREEMENT

Subject to the Declarations, Limits and Sub-Limits of Liability, Policy period and

the following terms and conditions, the Policy insures against All Risk of direct

physical loss or damage occurring during the Policy period to Property insured

from any external cause except as hereafter excluded and whilst such property is

situated in the territorial limits stated in Item 6. of the Declarations.

The policy also insures Business Interruption and Extra Expense, all as detailed in

Addendum A of this Policy.

4. PROPERTY EXCLUDED

This Policy does NOT cover loss or damage to the following property:

***

I. Above ground, underground and submarine electrical transmission and

distribution lines, poles, and related equipment, including supporting

structures, wires, conductors and cables, except where situated within

one thousand (1000) feet of the Assured’s generating facilities. This

exclusion does not apply either to all overhead, underground and

submarine fiber optic cables.

5. PERILS EXCLUDED

This Insurance does NOT cover loss, damage, or expenses directly or indirectly

caused by:

***

B. Wear and tear, gradual deterioration or rust, mould, wet or dry rot,

contamination, erosion, corrosion, improper packing, insects or vermin

unless a peril not otherwise excluded ensues, and then only for the

physical loss or damage caused by such ensuing peril;

6. BASIS OF INDEMNIFICATION

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PREPA

DOL: 9/20/17

Page 3 of 6

In the event of physical loss or damage to Property Insured hereunder by a peril

insured, the amount payable under this Policy shall be calculated on the basis of

the reinstatement or replacement of the property lost or damaged, subject to the

following provisions:

Reinstatement or replacement shall mean:

(1) where property is destroyed, the rebuilding of any buildings or the

replacement by similar property of any other property, in either case in a

condition equal to but not better or more extensive than its condition

when new.

(2) where property is damaged, the repair of the damage and the

restoration of the damaged portion of the property to a condition

substantially the same as but not better or more extensive than its

condition when new.

ADDENDUM A

BUSINESS INTERRUPTION

(GROSS EARNINGS)

1. INSURING CLAUSE

Subject to the Limits of Liability stated in the Declarations, this Policy is

extended to cover loss resulting from necessary INTERRUPTION OF

BUSINESS caused by physical loss or damage, as insured by this Policy, and

occurring during the term of this Policy, to the following:

A. real and/or personal property as insured by this Policy; and

B. Property of others, provided that such physical loss or damage to such

property wholly or partially prevents:

i. a supplier of goods, materials, products or services to the

Assured from rendering their goods, materials, products and/or

services; or

ii. a receiver of goods, materials, products and/or services from the

Assured from accepting the Assured’s goods, materials, products

and/or services.

3. CONDITIONS

A. DIRECT DAMAGE

In respect of loss under this Policy resulting from physical loss or damage

to real or personal property as Insured by this Policy, no claims shall be

sustained under this Extension resulting from the necessary interruption of

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business unless and until a loss has been paid, or liability admitted, in

respect of such physical loss or damage.

20. MARGIN CLAUSE

As soon as practicable after each anniversary date and/or the expiry date of this

Policy, as applicable, the Assured shall file with Insurers a statement of values

declaring one hundred percent (100%) of the total value of all property insured by

this Policy during the previous annual period.

If the values reported in accordance with the above differ by more than ten

percent (10%) from those reported at inception and/or the previous anniversary

date, then the premium for the annual period shall be adjusted accordingly,

calculated at pro rata of slip rates on the amount of such increase or decrease in

values.

If the values reported differ by less than ten percent (10%), there shall be no

adjustment in premium.

Insurers presently understand that PREPA has been able to generate sufficient power to meet the

Island’s demand soon after Hurricane Maria occurred, but that damage to transmission and

distribution lines, poles, and related equipment, including support structures, wires, conductors

and cables (“T&D Equipment”) has prevented adequate electrical transmission and distribution.

The Policies exclude damage to T&D Equipment except where situated within one thousand

(1000) feet of a generating facility. Further, the Policies do not provide coverage for business

interruption loss that results from damage to such T&D Equipment.

The Policies do not provide coverage for, and expressly exclude, loss, damage, or expenses

directly or indirectly caused by wear and tear, gradual deterioration or rust, mold, wet or dry rot,

contamination, erosion, and corrosion. Further, the Policies provide that covered physical

damage will be valued per Clause 6, “Indemnification” (“(1) where property is destroyed... in a

condition equal to but not better or more extensive than its condition when new. (2) where

property is damaged... to a condition substantially the same as but not better or more extensive

than its condition when new.”). Additionally, Insurers will seek to allocate damage caused by

Hurricane Irma as opposed to Hurricane Maria for the purpose of applying separate deductibles

and limits.

Insurers will review the property declarations made during the underwriting, particularly the

number and value of facilities/property that may have been under-declared, to evaluate the

applicability of, among other things, the Margin Clause.

Concerning the business interruption loss as covered in Addendum A, Section 1(B)(ii), Insurers

will seek to understand how damage to T&D equipment and/or the loss of population on the

Island, rather than covered physical damage to receivers, has affected demand.

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Insurers reserve all rights to adjust the claim and deny or partially deny portions of it in

accordance with the above.

Insurers look forward to working with PREPA to conclude the investigation into PREPA’s

Hurricane Maria loss, and request that PREPA provide any information pertinent to the issues

discussed in this letter, and any other information PREPA believes is relevant to the

investigation. Insurers request that PREPA expeditiously respond to any VCI’s, RTS’s, LIG’s,

and MD&D’s requests for information, which will assist in a timely resolution of the claim

adjustment.

The Insurers are investigating the claim while reserving all rights. Any specific reference in this

letter to certain provisions of the Policies is not intended to be, and shall not be construed as, a

limitation or restriction on the applicability of different or additional provisions in the Policies,

or on Insurers’ ability to rely on and enforce any provision in the Policies. Insurers specifically

reserve the right to rely on and enforce every provision, including without limitation, provisions

that have not been specifically referred to in this letter.

Please be advised that this letter and the actions of VCI, RTS, and any consultant retained to

assist in the investigation of the claim do not constitute a waiver of any policy provisions or

defenses available to Insurers. Insurers continue to reserve the right to assert any and all claims

or defenses––whether equitable, legal, or contractual––at any time, waiving none.

Please contact me with any questions.

Sincerely,

Vericlaim, Inc.

Paul Sherman

Senior Executive General Adjuster

cc: Edwin I. Rivera - Edwin I Rivera Brokers Corp

PO Box 270204, San Juan, P. Rico

Calle 3 SO # 1031, Urb. La Riviera, San Juan Pr.

erivera@eirseguros.com

Laura T. Sanchez – Claims Manager Willis Towers Watson

1450 Brickell Ave. Suite 1600

Miami, FL 33191

laura.t.sanchez@willistowerswatson.com

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Attachment A

Lead Insurer Slip No./UMR

Argenta Syndicate 2121 B0804Q14312F17

General Security Indemnity Co. of

America

FA0033264-2017-1

Starstone Syndicate 1301 B0804Q11038F17

Talbot Syndicate 1183 B0804Q19672F17

Syndicate 3902 NOA at Lloyd’s. B0804Q19674F17

Ironshore Insurance Ltd.

(Bermuda)

441663717A&B

MS Amlin Underwriting B0804Q19673F17

Cathedral Syndicate 2010 B0804Q19669F17AAK

Aspen UK Insurance Ltd PWAHAAA17

Starr Technical Risks Agency, Inc. B0804Q14312F17

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