EXHIBIT 20 

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Exhibit 20 Page 1 of 97
Puerto Rico Electric Power Authority

Fiscal Plan 

San Juan, Puerto Rico

April 28, 2017

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Exhibit 20 Page 2 of 97
Disclaimer

2

The information contained herein (the "Information") has been provided and prepared by the Puerto Rico Electric Power Authority ("PREPA" or the

“Company”) and is in draft form subject to further discussions and revisions. No representation or warranty, express or implied, is made by the Company, the

Puerto Rico Fiscal Agency and Financial Advisory Authority (“AAFAF”) or their respective advisors as to the accuracy or completeness of the Information,

which has not been independently verified. The Company, AAFAF or their respective advisors shall have no responsibility or liability for the accuracy or

completeness of the Information, any errors, inaccuracies or omissions in the Information or the consequences of any reliance upon the Information. Without

limitation of the foregoing, no representation or warranty, express or implied, is made by the Company, AAFAF or their respective advisors as to the accuracy

or completeness of any forecasts or projections contained in the Information. Nothing contained in the Information may be relied upon as a promise or

representation as to the future. The Information does not constitute an offer or solicitation to sell or purchase securities. Neither the Company, AAFAF or their

respective advisors shall have any liability, whether direct or indirect, in contract or tort or otherwise, to any person in connection with the Information.

Projections are included in the Information. Such projections have not been examined by auditors. The projections and other material set forth herein contain

certain statements that are “forward-looking statements”. These statements are subject to a number of assumptions, risks, and uncertainties, many of which are

and will be beyond the control of the Company including, among others, availability and timing of liquidity sources, availability of supplies and supplier

financing, changes in general economic, political, governmental and business conditions globally and in Puerto Rico, the Company’s ability to achieve cost

savings, changes in interest rates, changes in inflation rates, changes in exchange rates, changes in fuel prices, changes in business strategy, demographics and

various other factors. These statements speak as of the date indicated and are not guarantees of future performance. Actual results or developments may differ

materially from the expectations expressed or implied in the forward-looking statements, and the Company undertakes no obligation to update any such

statements whether as a result of new information, future events or otherwise. Certain projections/forecasts are based on data generated by the former

restructuring advisor as of 12/31/2016, which projections/forecasts the Company, AAFAF or their respective advisors have not been able to validate or

corroborate given certain limitations in the available records.

Recipients of the Information agree to keep the Information strictly confidential. The Information is highly confidential and contains proprietary and

confidential information about the Company, its subsidiaries and its operations. This document material is being presented solely for your information and

may not be copied, reproduced or redistributed to any other person in any manner. At the request of the Company, the recipient will promptly return all nonpublic material received from the Company (including this document) without retaining any copies thereof. For the avoidance of doubt, Information includes

the nature, substance, status, and terms of any discussions related to the Information discussed herein.

The Information does not constitute an offer or invitation to purchase or subscribe for any shares or other securities of the Company and neither any part of

this document nor any information or statement contained therein shall form the basis of or be relied upon in connection with any contract or commitment

whatsoever. By receiving the Information, you agree to be bound by the foregoing limitations.

Confidential - Subject to Further Revisions and Modifications

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Exhibit 20 Page 3 of 97
Table of contents

3

I. Executive Summary

II. Background

III. Financial Projections – Assumptions

IV. Financial Projections

V. Restructuring Support Agreement (“RSA”)

VI. Adequate Liquidity

VII. Detailed Investment Program

VIII. New Rate Structure

IX. Operational Performance Improvements

X. Governance

XI. Key Risks & Mitigation Strategies

XII. Appendix

Confidential - Subject to Further Revisions and Modifications

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Exhibit 20 Page 4 of 97
I. Executive Summary

4

Confidential - Subject to Further Revisions and Modifications

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Exhibit 20 Page 5 of 97
What PREPA’s amended Fiscal Plan seeks to achieve

5

EXECUTIVE	SUMMARY	– FISCAL	PLAN

Completing a Restructuring Process That Began 2014 - 2015

§ The Puerto Rico Electric Power Authority (“PREPA”) has stabilized its external financial situation through long-term forbearance agreements with a majority of 

creditors. PREPA implemented cash flow forecasting and other operational controls and efficiencies to stabilize the internal financial challenges. PREPA also 

negotiated a Restructuring Support Agreement, as amended to-date, with a substantial majority of its creditors – establishing the baseline for permanent debt 

restructuring. 

§ Since beginning the restructuring process, PREPA has achieved substantial one-time and recurring projected annual savings through operational performance 

improvements, including fuel supply contracts and inventory controls. Furthermore, Puerto Rico has enacted a series of laws to provide rate transparency, 

regulatory oversight, enhanced accountability and CILT reform, among others. 

§ PREPA also commissioned a safety assessment and has been implementing industry-leading safety recommendations addressing systems implementation and 

safety culture transformation – for the protection of its employees and PREPA’s infrastructure. 

A New Vision – PREPA 2.0

§ PREPA fully appreciates that, despite fiscal and economic uncertainties, now is the time to transform the electric utility for the 21st Century. This includes 

modernization of infrastructure through Public Private Partnerships (including the AOGP project), renewable energy, innovative technology to drive 

efficiencies and improve customer service, professional and independent Board of Directors, fair and efficient rate designs, strategic outsourcing, and a 

formal Project Management Office (PMO) to drive innovation, operational transformations and restructuring support. 

A Revised & Realistic Fiscal Plan 

§ At the direction of the Fiscal Oversight Management Board (“FOMB”), PREPA’s new management has prepared this Fiscal Plan which supersedes prior 

submissions. From the date the new Administration took office, and following the appointment of PREPA’s new Executive Director, PREPA, AAFAF and 

their respective advisors have worked ardently, in cooperation with the Board’s advisors, to put forth a credible and reliable Fiscal Plan to guide the 

transformation and restructuring of Puerto Rico’s principal utility - amidst a challenging macroeconomic landscape. 

§ Also at the request of the FOMB, PREPA has revised and updated its financial projections and Fiscal Plan to reflect consistency with the central 

government’s certified Fiscal Plan and its macroeconomic assumptions – as well as account for revised externalities that conform to existing trends (local 

and world-wide). 

§ The Fiscal Plan commits to fiscal responsibility and implements urgently needed infrastructure modernization, public-private partnerships, 

targeted expenditure reductions/efficiencies (operational and other) and specific revenue enhancements to return PREPA to (i) fiscal stability, (ii) 

efficient and competitive energy prices, (iii) compliance with environmental and health standards, and (iv) being an agent of economic growth. In 

particular, the Fiscal Plan contemplates revised fuel prices, distributed generation trends, urgent infrastructure investments for needed efficiencies and 

environmental compliance, operational transformation to benefit its customers and Puerto Rico’s economy. 

Confidential - Subject to Further Revisions and Modifications

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Set of key criteria included in the Fiscal Plan

6

EXECUTIVE	SUMMARY	– KEY	CRITERIA

Area for Revision Section Addressed

1 Ensure PREPA Fiscal Plan baseline forecasts align with central government 

macroeconomic assumptions

III. Financial Projections –

Assumptions 

2 Lower demand and volume baseline projections to align with historical trends of a 

decline in consumption IV. Financial Projections

3 Incorporate latest terms of RSA, reflect debt service and determine uses of 

increased liquidity

V. Restructuring Support 

Agreement (“RSA”)

4 Detailed investment program, including funding gap, total cost, major projects, 

and timeline

VII. Detailed Investment 

Program

5 Adopt Formula Rate Mechanism and ensure alignment between PREC and PREPA 

on path forward VIII. New Rate Structure

6 Address CILT spending to municipalities VIII. New Rate Structure

7 Broaden operational savings to include further labor, maintenance strategy, and 

T&D savings

IX. Operational Performance 

Improvements

8 Target additional fuel savings by driving generation efficiency IX. Operational Performance 

Improvements

9 Demonstrate measures that enable corporate governance to improve compliance 

and viability of plan X. Governance

On February 21, 2017, PREPA submitted a draft Fiscal Plan to the FOMB premised on the concept of equitable burden sharing amongst 

PREPA’s key stakeholders, including a Restructuring Support Agreement with creditors controlling over 70% of its financial liabilities. Based on 

the FOMB’s request, PREPA hereby submits a revised Fiscal Plan that addresses the FOMB’s criteria for Fiscal Plan certification

Confidential - Subject to Further Revisions and Modifications

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Exhibit 20 Page 7 of 97
II. Background

7

Confidential - Subject to Further Revisions and Modifications

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Exhibit 20 Page 8 of 97
0 

5 

10 

15 

20 

25 

30 

35 

40 

45 

NYPA 

SRP 

CPS 

Santee Cpr. 

LADWP 

NPPD 

OPPD 

LIPA 

PREPA 

CCPU Dist. 1 

mWh Sales (in millions) 

Public Power Utility 

What is PREPA?

§ Total Revenues: $2.9bn

§ Total Assets: $9.4bn

§ Total Liabilities: $11.4bn

§ Electric System: 

§ Generating Capacity: 5,839 MW 

§ 31 major generating units in 20 facilities

§ Transmission and Distribution:

§ Transmission Lines: 2,416 miles

§ Distribution Lines: 30,675 miles

§ 38 kV substations: 283

§ 115 kV substations: 51

§ Reliance on oil 45% versus national average of 3.7%

BACKGROUND	– OVERVIEW

PREPA is one of the largest public power utilities in the United States

Source: PREPA, as of June 30, 2016, based on unaudited results 8

As of June 30th, 2016

Source: APPA. “U.S. Electric Utility Industry Statistics, 2014”. 2016-2017 Annual Directory & Statistical Report

Public Power Utility

MWh Sales (in millions)

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Exhibit 20 Page 9 of 97
Key historical challenges

These challenges have resulted in a difficult financial situation for PREPA

§ No access to bond market and bank financing as of 2014

§ Over $4bn dollars needed for an infrastructure investment program to stabilize and improve 

operational efficiency, safety, reliability, environmental compliance, and conversion to clean energy

BACKGROUND	– KEY	HISTORICAL	CHALLENGES

9

§ Old, inefficient and unreliable T&D and Generation infrastructure

§ High dependence on fuel oil and inability to diversify fuel mix

§ Lack of strategic environmental compliance plan, including MATS (Mercury and Air Toxic Standards)

§ Relatively high level of theft and non-technical losses

§ Changing industry dynamics that required changes in PREPA business model

§ Legal requirements to provide power to certain customers at subsidized rate 

§ Lack of institutionalized processes and procedures

§ Outdated systems and information technology

§ Disorganized and ineffective customer service infrastructure

§ Above-market collective bargaining agreements with evergreen provisions and underfunded pension obligations

§ Prolonged and ongoing recession has led to a significant drop in energy sales

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Exhibit 20 Page 10 of 97
Chronic underinvestment and inconsistent management have led PREPA’s facilities and business practices to fall significantly 

behind industry standards, which is aggravated by the fact that PREPA operates an isolated system, in challenging terrain and

is subject to natural atmospheric events

PREPA has operated far below industry standards

Aging Infrastructure

Ineffective Collections and Monitoring

§ PREPA’s median plant age is 44 years, compared to an 

industry average of 18

§ PREPA’s facilities experience significant forced 

outages due to underinvestment

§ PREPA historically did not effectively collect from municipalities, government agencies or other customers

§ Poor customer service infrastructure

§ PREPA regularly experiences significantly higher non-technical losses than other utilities due primarily to poor 

monitoring and metering standards

BACKGROUND	– KEY	HISTORICAL	CHALLENGES

10

44

15

38

20 20

0

5

10

15

20

25

30

35

40

45

50

PREPA Hawaii Plants US - Oil Plants US - Gas Plants US - All Plants

Years

18

15.9

5.9

11

10.3

0

2

4

6

8

10

12

14

16

18

PREPA Hawaii Plants US - Oil Plants US - Gas Plants

10.8

Source: PREPA Internal Figures

Confidential - Subject to Further Revisions and Modifications

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Exhibit 20 Page 11 of 97
Source: Dupont, Workplace Safety Assessment Report: PREPA, November 29, 2014

BACKGROUND	– PREPA

PREPA’s Need for immediate actions

Ø Enforcement of safety rules / discipline

Ø Bridge between Management and Union leadership

Ø Deploy Risk Mitigation Teams

Ø Establish Operational Risk Management Systems

PREPA’s safety system effectiveness rating is less than Level 1 - Fundamentals 

§ PREPA’s safety system and record is dramatically below industry standards

§ Upon field assessment, as of 2014, performance is near Fundamentals level – basic elements are not in place 

§ Approach to response and investigation of injuries is wrong / deficient 

§ Total Recordable Incident Rate (2012) is 5x greater than industry average 

§ Actual costs of injury statistics through July 2014 is unsustainably high (wage losses and annual insurance) 

§ PREPA safety system is barely reactive (vs. proactive) 

11

Safety system

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Years of underinvestment have led to severe degradation of infrastructure

12

Certain T&D and generation infrastructure is degraded, unsafe and unreliable. Critical investment for emergency 

maintenance and upgrading is key to ensure reliable and efficient generation and delivery of energy, including a modernized 

grid that can drive efficiencies

BACKGROUND	– PREPA

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The outage of September 2016 resulted in a government declared state of 

emergency

13

BACKGROUND	– PREPA

The most recent PREPA power outage impacted 50% of the island’s residents without power for nearly a week 

Confidential - Subject to Further Revisions and Modifications

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14

§ Incident causes included a combination of technical-mechanical faults/damages in equipment as well as operational issues 

– together with limited available energy reserves at the time of the incident

§ PREPA’s financial challenges and staffing shortages affected the utility’s ability to undertake sufficient preventive 

maintenance of its systems, especially in the area of conservation

§ Inadequate equipment maintenance programs

Historical outages

BACKGROUND	– PREPA

Source: Report from the Comisión Especial de Energía, “Colegio de Ingenieros y Agrimensores de Puerto Rico”, December 31, 2016. 

PREPA has suffered from significant and above industry average outages. The September 21, 2016 PREPA 

switchyard fire/explosion incident is the most recent, which affected Puerto Rico’s entire energy grid. Full 

recovery of the system did not occur until September 25, 2016 

Incident Report Conclusions

Recommendations

§ PREPA needs a robust preventive maintenance program in the short term; T&D system needs to be priority

§ Need more resources (human and financial) for operation and conservation programs

§ Specialized human resources (technical) is a critical issue; recent trends showing PREPA’s loss of key personnel is 

unsustainable

§ Need to revise/update replacement equipment and specs

§ Need to revise the safety/protection system for generating units to ensure that they adequately protect (as opposed to 

overprotect) the entire grid system

§ Evaluate the use/application of available technologies, such as SPS/Special Protection Systems and Synchrophasors

Measurements, that may provide additional guarantees as well as a reduced risk of total system collapse

Confidential - Subject to Further Revisions and Modifications

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Exhibit 20 Page 15 of 97
PREPA’s rates historically have not covered costs

Per kWh

Historical all-in rate(1) $.24 $.28 $.26 $.26 $.21 $.19

Est. rate required $.29 $.36 $.30 $.33 $.28 $.21

Est. historical gap $.05 $.08 $.04 $.07 $.07 $.02

BACKGROUND	– PREPA

$.05

$.08

$.04 $.07

$.07

$.02

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

FY11 FY12 FY13 FY14 FY15 FY16 EST

Average Annual Rate ( $ / kWh)

Historic all-in rate charged Estimated historical rate gap

15

§ The current debt crisis was founded in years of rate deficits, during which operating expenses incurred were not recovered in rate 

revenues

§ This situation was exacerbated by the practice of meeting operating revenue shortfalls with proceeds from debt issuance, instead of 

investing these proceeds on infrastructure maintenance or capital investment

§ PREPA currently has, and will continue to need, years of catch-up spending and investment in its T&D system to become and remain

a catalyst of growth for Puerto Rico’s economy

Confidential - Subject to Further Revisions and Modifications

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Exhibit 20 Page 16 of 97
PREPA incurred significant debt to cover costs

1) Fiscal years 2010-2014 as reported in PREPA’s audited financial statements. Current balance reflects PREPA’s total bonds outstanding, fuel lines and 

GDB lines of credit

2) FY 2015 and FY 2016 are based on unaudited results. FY2016 free cash flow is due to nonpayment of debt service

Debt Balance ($m)(1) Free Cash Flow ($m)

As demand has fallen, financial performance has declined and PREPA has borrowed to fund operating expenses. By 2014, 

PREPA was overburdened with debt and had no access to additional liquidity

BACKGROUND	– PREPA

16

(2) (2)

 $7,587 

 $8,089 

 $9,043 $8,988 

 $9,413 

 $9,232 

 $9,042 

 $7,000 

 $7,500 

 $8,000 

 $8,500 

 $9,000 

 $9,500 

 $10,000 

2010 2011 2012 2013 2014 2015 2016

 $(220)

 $(342)

 $(666)

 $(221)

 $(530)

 $(198)

 $48 

-$1,000

-$500

$0

2010 2011 2012 2013 2014 2015 2016

Confidential - Subject to Further Revisions and Modifications

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Exhibit 20 Page 17 of 97
41.3

39.0

32.3

28.0

24.7

19.8

Comparison of PREPA rate to other island utilities

Average Rate 2008 to 2014 (1) (cents / kWh)

US Virgin

Islands

Bermuda

Electric

Jamaica

Public Service Hawaii PREPA

Approved

2017 PREPA Rate 

MWh/

Customer 13.2 16.5 5.4 21.8 12.6 

# of Customers 

(000s) ~55 ~40 ~590 ~380 ~1470

Note: Inclusion of this list should not be read to suggest that the relevant utility is a comparable utility or that the rates should be comparable. Nor should it be read 

to suggest that it is appropriate to raise rates to the level indicated in the chart. 

Rate is defined as operating revenue per kWh.

Source: PREPA data, self-published annual utility financial reports

1) Calendar Year Basis Average 2008 to 2014

BACKGROUND	– PREPA

17

Confidential - Subject to Further Revisions and Modifications

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Pension system underfunding 

§ PREPA’s Employee Retirement System (“PREPA ERS”) is designed to meet the defined-benefit pension and other post-employment 

benefits (“OPEB”) obligations of PREPA’s active and retired employees (including beneficiaries)

§ The PREPA ERS is significantly underfunded - as much as ~$2.2bn (based on a 6.75% rate of return) - with annual funding 

requirements of approximately $164m. PREPA is in the process of reviewing and updating these numbers and projections(1) 

§ PREPA has an outstanding debt of $62m with the PREPA ERS resulting from a contribution shortfall in previous fiscal years

§ OPEB ($384m accrued) is entirely unfunded as reported in PREPA’s 2012 “Report of Actuary on the Other Post-Employment Benefit 

REVISED Valuation”, revised as of October 2015 

§ The following chart depicts the funding ratio of the ERS plan under various rates of return: 

PREPA 2014 Actuary Report 

($bn) Estimated 12/12/2016

Discount Rate 8.50% 6.75% 5.00%

Total Pension Liability (“TPL”) 3.1 3.7 4.4

Fiduciary Net Position (PREPA ERS 

Assets ) (“FNP”) 1.4 1.4 1.4

Net Pension Liability (“NPL”) 1.7 2.3 3.0

Funded Ratio 45% 38% 32%

18 1) Milliman will be performing a new evaluation to update actuarial deficit

BACKGROUND	– PREPA

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PREPA is facing an environmental / health compliance cliff

19

BACKGROUND	– PREPA

Liquidity/Working Capital Federal fines and penalties (accrued and continuing) are 

substantial/imminent 

Working Capital Required improvements to comply (emission controls, 

conversion, etc.) are significant

Operations Operational limitations and constraints would arise under 

federal law

Rates Fines, penalties, compliance expenses would increase costs and 

carry threat of additional regulatory action

Public Health

Public health concerns may exacerbate demographic challenges 

and quality of life for residents; risk of lawsuits from 3rd parties 

under CAA, common law and other applicable statutes

Economy Increased rates, healthcare costs, operational expenses, will 

negatively impact the economy 

Environment Increased environmental impact is negative all around 

§ PREPA faces imminent and significant environmental compliance challenges under revised federal Clean Air 

Act (“CAA”) emission standards

• NAAQS – New National Ambient Air Quality Standards for Sulfur Dioxides (SO2)

• MATS – Mercury and Air Toxic Standards

§ Potential impacts on include:

Confidential - Subject to Further Revisions and Modifications

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Exhibit 20 Page 20 of 97
PREPA had $9.0bn in funded debt obligations as of December 31, 2016, with debt service obligations of $4.5bn over the next 

five years:

Current debt structure totaling $9 billion is not sustainable

20 1) Interest rates reflect default interest rates

2) Past due maturities are currently under forbearance

BACKGROUND	– FINANCIAL	OBLIGATIONS

Principal Weighted average

Obligation ($ in millions) outstanding interest rate Maturities

Build America Bonds $676 6.10% 7/1/30 - 7/1/40

Uninsured power revenue bonds 4,958 5.27% 7/1/17 - 7/1/43

Total uninsured legacy bonds $5,634 5.37%

Insured power revenue bonds $2,250 4.73% 7/1/17 - 7/1/37

Total legacy bonds $7,884 5.19%

Series 2016 (Relending Bonds) $375 8.29% 1/1/18 - 7/1/22

Total bonds outstanding $8,259 5.33%

Scotiabank Credit Agreement $550 7.25% 8/14/2014

Citi Credit Agreement 146 7.25% 1/10/2014

Fuel Line Loans $696 7.25%

Total bond and fuel line obligations $8,955 5.48%

JP Morgan LIBOR Fixed / Floating $34 4.08% 7/2/2029

US LIBOR Fixed / Floating 17 4.08% 7/2/2029

Total swap claims $51 4.08%

GDB Loan 35 6.00% 12/31/2014

Isabela Dam Loan 1 7.00% 6/30/2018

GDB Loans $36 6.03%

Total financial obligations $9,042

(1), (2)

(2)

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PREPA has been working on a consensual restructuring process based on the 

principle of an equitable burden-sharing by all stakeholders 

21

§ By 2014, PREPA faced a serious liquidity and financial crisis

• Fuel line maturity of over $700m in summer 2014

• Lack of liquidity, including inability to pay ongoing fuel suppliers in a timely manner

• High oil prices leading to elevated electricity costs

§ Stabilized its external financial situation in August 2014 by signing long-term forbearance agreements with 

creditors representing more than 60% of PREPA’s debt

§ Retained Chief Restructuring Officer, and implemented cash flow forecasting, other operational controls and 

efficiencies to stabilize the internal financial situation

§ Began process of negotiating a Restructuring Support Agreement (“RSA”) with creditors representing more than 

70% of PREPA’s debt, including fuel line

• Initial RSA signed in December 2015

• RSA provided basis for permanent debt restructuring

• Recent (2017) negotiations with creditors resulted in an agreement in principle on further RSA 

modifications and benefits for PREPA and ultimately for consumers

§ Obtained more than $400m in short term “relending” financings in 2016 from supporting creditors

BACKGROUND	– PREPA

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§ Enactment of PREPA Revitalization Act (Act 4-2016)

§ Energy Commission approval of:

• Transition Charge (June 2016)

• PREPA’s provisional rate adjustment of 1.3 cents per kWh was implemented August 2016 

• PREPA’s final authorized rate adjustment of 0.988 cents per kWh was approved January 10, 2017, to be 

implemented with reconciliation for provisional rate July 1, 2017

• Final projected increase of $170m in revenues

• RSA contemplates agreement on modifications to the rate structure to better facilitate PREPA’s 

transformation without impacting repayment of restructured debt. 

• Modified Integrated Resources Plan (September 2016). Motion for reconsideration of certain elements of 

IRP is pending, including approval by PREC for AOGP

§ Achieved $271m in one-time cash savings and identified $254m in projected recurring annual savings 

(approximately 1.4 cents/kWh based on present load) through operational improvements(1)

§ Implemented recommendations of industry-leading safety consultant (DuPont)

§ Freepoint Amendment

• Contract was amended and extended, enhancing the terms for PREPA and ensuring the supply of No. 6 fuel

PREPA has achieved significant progress in its ongoing transformation

BACKGROUND	– PREPA

22 1) New management team is in the process of validating the annual savings identified by PREPA’s prior restructuring advisor

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Exhibit 20 Page 23 of 97
A Transformed 

Utility Company

New Rate 

Structure

Internal Cost 

Savings & 

Efficiencies

Legal Reform & 

Enhanced 

Oversight

Adequate 

Infrastructure Plan

Sustainable Capital 

Structure

Employee Benefits 

& Pension Funding 

Measure

Goal of PREPA’s transformation is to share the burden equitably and to transform PREPA 

into a world class utility that provides for a safe, reliable and resilient electric system

§ Implementation of 

revised, more 

transparent rate 

structure that covers 

PREPA’s real and 

reasonable costs

§ Cost based and progrowth rate design

§ Additional 

enhancements 

contemplated in RSA

§ Comprehensive 

review and 

assessment of 

PREPA’s 

operations

§ Implementation of 

initiatives that will 

result in one-time 

and recurring 

improvements

§ Make PREPA a 21st

century utility by 

implementing a 

series of 

technological 

initiatives

§ PREPA 

Transformation Act 

(Act 57-2014)

§ PREPA 

Revitalization Act 

(Act 4-2014)

§ PROMESA & 

FOMB

§ Combination of self-funding 

with P3s

§ $4.66bn 10-year Infrastructure 

Program

• $470m AOGP project and 

Gas Conversion (1)

• Actionable plan to 

achieve MATS 

compliance

• Unit upgrades for plan 

efficiencies via P3s

• Fully fund maintenance 

capex on pay-go basis

§ Deleveraging and cash 

flow relief

§ Execution of 

securitization transaction

§ Extension of debt 

maturities

§ Facilitation of rate 

stability that provides 

lower interest costs

§ RSA terms will result in 

$850m debt burden 

reduction and ~$2.2bn in 

debt service relief over 

first 5 years, following 

deal execution

§ Review of and 

potential 

modifications to 

CBAs and pension 

plans

§ Act 66-2014 & Act 3-

2017 

§ Annual payroll 

savings

BACKGROUND	– TRANSFORMATION

23 1) Subject to obtaining external funding

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 24 of 97
III. Financial Projections –Assumptions

24

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 25 of 97
Updated financial projection assumptions

FINANCIAL	PROJECTIONS	– ASSUMPTIONS	

25

Revised Assumptions

Energy Sales

§ Revised econometric model forecasts that energy sales will drop 23% over the 10-year Fiscal Plan 

Period, compared to the less conservative outlook assumed in the previously submitted Fiscal Plan (the 

“Original Fiscal Plan”)

§ This significant decrease in projected energy sales, compared to the Original Fiscal Plan, is driven by:

• Updated fuel forecasts that reflect materially higher fuel prices over Fiscal Plan period;

• Revised results that reflect continued and accelerated deployment of distributed generation (240 

MW in pipeline per PREPA’s records as of January 2017(1));

• Pipeline of co-generation units planned by large industrial/commercial clients (42.6 MW) 

subtracts from overall sales(2)

Oil Prices § Updated oil prices forecast provided by the U.S. DOE incorporated in latest model

-5.00 

-4.00 

-3.00 

-2.00 

-1.00 

0.00 

1.00 

2.00 

2016 2017 2018 2019 2020 

Growth (%) 

Fiscal Year 

Economic Growth 

IAU-GI oct 2015 2017 Oversight Board Data 5,000 

5,200 

5,400 

5,600 

5,800 

6,000 

6,200 

6,400 

6,600 

6,800 

2015 2016 2017 2018 2019 2020 

GNP 

Fiscal Year 

GNP 

IAU-GI oct 2015 2017 Oversight Board Data 

1) Implicit in PREPA regression analysis

2) Co-generation could be higher as PREPA has identified other industrial and commercial clients that are seeking to install co-generation units

Per the FOMB’s request, PREPA updated its financial projections and macroeconomic assumptions to be consistent with the 

Government of Puerto Rico’s certified Fiscal Plan 

Confidential - Subject to Further Revisions and Modifications

Government Fiscal Plan Government Fiscal Plan

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 26 of 97
Updated fuel curves show an average increase 64% in fuel costs during the 

forecast period versus 33% in the February Fiscal Plan

FINANCIAL	PROJECTIONS	– ASSUMPTIONS

26 Source: EOD Data

$-

$2 

$4 

$6 

$8 

$10 

$12 

$14 

$16 

$18 

$20 

2018 2019 2020 2021 2022 2023 2024 2025 2026

$ / MMBtu

PROMESA Load Forecast Revised Load Forecast Feb Fiscal Plan / Rate Case Load

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 27 of 97
Change in consumer behavior and significant drop in costs of solar panels is accelerating 

distributed generation, impacting PREPA’s load and creating a business model challenge

FINANCIAL	PROJECTIONS	– ASSUMPTIONS

27

1,169 3,008

10,732

15,022

29,175

45,231

81,599

135,713*

43 138

563

779

1,150

2,002

4,575

7,657*

0

1000

2000

3000

4000

5000

6000

7000

8000

0

20000

40000

60000

80000

100000

120000

140000

2009 2010 2011 2012 2013 2014 2015 2016

Clients

Capacity (kW)

Installed Capacity Clients 

Distributed generation penetration is implicit in PREPA’s regression forecast

Integration of Distributed Energy Resources with PREPA’s Electric System

Source: PREPA Planning Department 

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 28 of 97
§ PREPA revised load forecast is consistent with the FOMB GNP and GDP economic projections for the Puerto Rico economy under the 

certified Fiscal Plan for the Government of Puerto Rico

§ PREPA has also incorporated recent(1) trends in large commercial and industrial cogeneration facilities

• The resulting adjusted load forecast would put the corporation on a precarious path

• This path is based on the negative feedback loop created by falling demand, that necessitates higher rates, that further incentivize 

decreased demand

PREPA energy sales / load forecast decreases by 23% over forecast period

FINANCIAL	PROJECTIONS	– ASSUMPTIONS

28

13,000

14,000

15,000

16,000

17,000

18,000

19,000

GWh Sales

PREPA Historic Load - Actual through 2016

February Fiscal Plan Forecast / CEPR Final Order Jan-17

Revised PROMESA Economic Projection Scenario

Load Forecast Overall Rate

1) As per 2016 records

$-

$0.05 

$0.10 

$0.15 

$0.20 

$0.25 

$0.30 

$0.35 

Overall Rate ($/kWh)

PREPA Historic Overall Rate - Actual through 2016

Expedited Repowering (FEB Fiscal Plan Load Forecast)

Government Fiscal Plan Economic Projection Scenario Revised PROMESA Economic Projection Scenario Government Fiscal Plan Economic Projection Scenario

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 29 of 97
§ PREPA’s load forecast is developed by regression analysis for each major customer class, Residential, Commercial, and Industrial, using 

independent variables for economic activity (GDP;GNP), class specific price, and historic class specific load

§ Graphs illustrating the customer class load history and projections are provided below:

PREPA energy sales / load forecast

FINANCIAL	PROJECTIONS	– ASSUMPTIONS

29

5,000

5,500

6,000

6,500

7,000

7,500

8,000

Residential

Actual

Residential kWh = 

f(GDP,Price,kWh(t-1))

6,000

6,500

7,000

7,500

8,000

8,500

9,000

9,500

Commercial

Actual

Commercial kWh = 

f(GDP,kWh(t-1))

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Industrial

Actual

Industrial kWh = 

f(GNP,Price,kWh(t-1))

1) Using PREPA’s rates records from 1983-2016

2) Using PREPA’s rates records from 2000-2016

(1) (1) (2)

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 30 of 97
Comments

Puerto Rico General 

Economic Outlook

§ The economic assumptions driving the load forecast are consistent with the assumptions in the Government of Puerto Rico’s 

certified fiscal plan. To the extent that the Government of Puerto Rico's assumptions change materially, PREPA may need to 

review or revise its own assumptions

Sales

§ Projections are based on the load forecast developed using assumptions in the Government of Puerto Rico’s certified fiscal plan

§ Total sales (including CILT) are expected to decline at an average annual rate of approximately 2.9% between FY2017 and 

FY2026. FY2017 sales are forecast to be 17,050,700 MWh, and FY2026 sales are forecast to be 13,141,262 MWh

Fuel Prices

§ Fuel price assumptions are assumed to increase from approximately $10/MMBtu in FY2014 to $17.6/MMBtu by FY2026 versus 

$14/MMBtu in draft Fiscal Plan submitted on February 21, 2017

§ Fuel and purchase power costs are pass-through expenses, so to the extent fuel prices vary from these assumptions, actual costs and 

rates will vary

Capital Investments

§ Capital investments projections assume accelerated generation project investment through Public-Private-Partnerships (P3)

§ It does not consider the Energy Commission’s modified IRP order issued in September 2016 as that order is currently being 

reconsidered at the request of PREPA

Securitization Timing

§ Projections assume that PREPA executes its restructuring transaction in August 2017 and that PREPA will remain responsible for 

its legacy debt until that time

§ See Section VI for more detail on the terms of the restructuring transaction

Aguirre Offshore Gas 

Project (“AOGP”)

§ Financing for the 80% debt funded portion of the project has not been arranged – it is assumed to be obtained in FY2018

§ Assumes PREPA funds approximately $56m of pre-construction costs with revenues in FY2017

§ Illustrative financing terms: 6.0% interest rate, 30-year, mortgage style loan

Formula Rate 

Mechanism (“FRM”)

§ Forecast bases its key rate assumptions on the January 10, 2017 ruling by the Energy Commission

§ Key assumptions include:

• The permanent rate adjustment to be decided by the Energy Commission in the previous fiscal year will remain in effect 

through the first six months of the next fiscal year and the new requirement will go into effect on January 1

• Base rate adjustments will be based on previous year budget to actual variances and known and measurable changes to the 

forward looking year forecast

• Fuel pass-through costs will be revised on a quarterly basis beginning July 1, 2017

• CILT will become a pass-through cost beginning on July 1, 2017

Key assumptions

30

FINANCIAL	PROJECTIONS	– ASSUMPTIONS

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 31 of 97
Key assumptions

Comments

FY2017 Rates / 

Revenues

§ Assumes PREPA’s rate structure is not materially changed in FY2017 per the Energy Commission 

§ PREPA implemented the provisional base rate increase of approximately 1.29 cents/kWh in August 2016

§ Revenues assumes that the final authorized rate (1.0 cent/kWh) has been in effect for full year

§ Reconciliation of provisional and final authorized rates will be cash position neutral

Rate Structure

§ Beginning in FY2018, it is assumed that PREPA adopts the changes to the rate structure prescribed in the January 10 PREC Order

§ The fuel and purchased power expense will be passed through to customers at cost

§ CILT and subsidies will also be recovered (passed through) at cost

Salaries

§ Salaries are forecasted based on projected number of employees and annual wages

§ Headcount is assumed to remain flat through the forecast period at 6,042 employees

§ Assumes no growth in salaries

Pension & Benefits § Pension & Benefits expenses have averaged approximately $150m/year for the past 3 years 

§ Going forward these costs are expected to fluctuate relative to headcount and revised actuarial numbers

Non-Labor O&M 

Costs

§ Based on historical costs for non-labor/fuel O&M expenses in PREPA’s accounting records and reports, which average $220m / 

year for FY 2012 to 2016

CILT and other 

appropriations

§ The cost of CILT throughout the forecast period considers the CILT caps stipulated by Act 4-2016 and assumes municipalities 

will pay for usage above those caps

§ Also assumes that municipalities will pay for electricity consumed by its for-profit entities 

Working Capital

§ A/R: Based on estimated revenues and historical days sales outstanding

§ A/P: Based on current and anticipated contract terms

§ Inventory: Fuel oil and materials inventory held flat for modelling purposes, additional analysis to be performed on cash impact 

of changes in non-cash working capital

31

FINANCIAL	PROJECTIONS	– ASSUMPTIONS

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 32 of 97
Income statement assumptions

Comments

Revenue

§ Projection based on assumption that base rates are adjusted annually to reflect forecast test year revenue requirement and prior 

year revenue deficiency or surplus 

§ Pass-through riders are implemented and adjust to recover revenue for pass-through expenses

§ Other income remains flat (comprised of interest on cash, disconnection fees, late fees, and income from subsidiaries) 

§ SPV income is net of bad debt expense and the true-up for collections lag(1)

Fuel & Purchased Power 

Expense

§ Projected expenditures on fuel are consistent with PREPA’s IRP, such that PREPA moves its generation mix to be less 

dependent on fuel oil and towards P3 generation

§ Assumes certain investments are made, which enable a shift to greater natural gas generation: see section VII for Detailed 

Investment Program

Labor Expenses(2)

§ Projected based on historical data by union/management group and directorate

§ Includes retirement system (including annual additional employer contribution totaling $60m), health plan, social security, 

Christmas bonus and worker’s compensation insurance

§ All overtime and overtime benefits are projected separately from full-time and temporary employees

Unclassified Division 

Expenses

§ Comprised of materials, per diem, property & casualty insurance premiums, restructuring fees, retiree medical benefits, security

expenses, banking services, maintenance, utilities, and miscellaneous expenses

§ Restructuring fees are assumed to be $28m in FY2017 and $40m in FY2018

Bad Debt Expense § Bad debt is assumed to be 2.4% of total revenue requirement net of projected collections improvements

Energy Administration 

Assessment § Is legislatively mandated to be $5.8m per year to cover PREC operating costs

CILT & Special 

Customer Subsidies § Assumed to be collected through a rate rider pass-through mechanism similar to fuel and purchased power 

Depreciation § Depreciation is projected to be 2.6% of gross fixed assets for each fiscal year 

Interest/Financing § Projections were based on PREPA and PREPARC debt schedules and include illustration for potential AOGP financing

Cancellation of Debt 

Income § Includes 15% principal haircut on exchange bonds in PREPA à PREPARC transaction

32 1) True-up collection lag has an average annual impact of $26m/year

2) Subject to additional reductions to be achieved following the approval of HB938, which is currently pending approval by the Puerto Rico legislature

FINANCIAL	PROJECTIONS	– ASSUMPTIONS

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 33 of 97
Balance sheet assumptions

Comments

Cash and equivalents § Starting FY2018, includes general fund, revenue funds and working funds; $146.7m of cash at GDB is not included, consistent with 

GDB’s fiscal plan

Accounts receivable § Accounts receivable follows working capital trends based on projected revenues

§ Accrued CILT increases as expenses higher than revenues until permanent rate when revenues will match expenses

Inventories § Fuel oil inventory decreases beginning in January 2018 with the conversion of Aguirre and San Juan in January 2021

Prepayments and non-current 

receivables

§ Prepayments includes escrow, insurance and payroll related funds – accounts held constant due to minor variation

§ Non-current receivables are held constant as PREPA does not make material adjustments to this account

Construction fund and other § Includes construction fund, reserve maintenance fund, PREPA client fund and other restricted fund – held constant as fluctuations occur 

within cash and cash equivalents and transfers are made out of general fund

Utility plant, net § Developed from investment & maintenance OPEX needed / depreciation schedule and additions and retirements included in IRP

§ Projections to change in net plant are based on PREPA’s expedited investment plan, retirements, and estimated depreciation

Deferred outflow of resources, 

debits, net

§ Includes all PREPA deferred debits – held constant with little variation. One adjustment is removal of deferred financial restructuring 

expenses which occurs on SPV close date

Notes payable to banks § Assumes a portion of fuel line debt remains the responsibility of PREPA, and a majority is tendered to the exchange transaction 

Accounts payable and Accrued 

liabilities

§ Accounts payable projection based on contract terms with fuel and purchased power suppliers and projected expenses for each fuel and 

purchased power type

§ Accrued CILT liability increases with projected accrued CILT assets

Customer deposits § Customer deposits vary throughout the year along with accrued interest so held constant

Other liabilities § Includes other current liabilities, accrued sick leaved, accrued OPEB and noncurrent customer deposits – all held constant as accruals 

not increasing and current liabilities have no variation

Long-term debt § Principal balances and adjustments in-line with deal scenario; assumes interest rate swaps and net unamortized debt discount are 

removed in SPV transaction, and refinancing of SPV principal from 2023 to 2027

Illustrative bank loan - AOGP § Includes, for illustration purposes, principle balance for AOGP financing in FY2018 onwards; 30-year, mortgage style bank loan at 6% 

interest

Net pension liability § Balance sheet does not reflect net pension liability

33

FINANCIAL	PROJECTIONS	– ASSUMPTIONS

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 34 of 97
Restructuring transaction assumptions

Comments(1)

Monolines Exchange

§ Legacy Bonds defeased by Mirror Bonds at same economic terms; $300m of principal deferral over years 1 – 6 

years

§ Syncora 2025 – 2027 Long Bonds to be defeased with mirror bonds, with $14m of debt forgivingness

Fuel Line Lenders 

/ GDB LOC 

Principal § $496m DK / Marathon / Solus debt exchanged into SPV bonds at par 

§ $236m Scotia & GDB debt termed out with amortization over 8 years

Interest

§ DK / Marathon / Solus debt exchanged into SPV bonds with 4.75% rate. (DK / Marathon / Solus have the option 

to exchange into CCABs)

§ Scotia & GDB debt remain obligations of PREPA with 5.25% rate

Ad Hoc Group 

(AHG) + 

Uninsured Bonds 

Participation § Implementation under PROMESA will provide PREPA with 100% participation from non-forbearing uninsured 

bondholders

Principal & Interest

§ Interest-only for 5 years and principal paid over subsequent term with final maturity in 2047

§ CIBs interest of 4.75%

§ Convertible Capital Appreciation Bonds (CCABS) accrete interest at 5.5% for first 5 years then pay cash interest

Backstop § Projections assume Creditors to provide a backstop for the New Money component although no agreement is in 

place for them to provide the New Money

Relendings

2017 Relending

§ AHG and Assured relending of July 2017 debt service into CIBs at par with 9.75% rate

§ National and Syncora relending of debt service with no amortization years 1 – 5, straight line for next 5 years. 

National rate of 7.00%, Syncora rate of 6.75%

Existing Relending § Maturity extension of 5 years. Interest only for next 5 years. Remain at current rates

DSRF/Surety DSRF/Surety

§ 4% Surety to cover agreed to uninsured Securitization Bonds, 2.5% to cover Mirror Bond securitization

§ PREPA/SPV 1% DSRF commitment unchanged

§ PREPA pays fees only years 1-7; straight-line paydown years 8-14

Timing Timing § Projections assume that PREPA executes its restructuring transaction in Q3 2017 and that PREPA will remain 

responsible for its legacy debt until that time

FINANCIAL	PROJECTIONS	– ASSUMPTIONS

34 1) All terms are subject to revision as the status of the RSA discussions are still on going

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 35 of 97
IV. Financial Projections

35

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 36 of 97
Income statement

FY 2017 reflects PREC approved operating and capital expenditures, with updates to debt service

Source: PREPA Internal Estimates

FINANCIAL	PROJECTIONS	– TEN	YEAR	FORECAST

36

Confidential - Subject to Further Revisions and Modifications

Income Statement FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026

Revenue

Fuel & Purchased Power $ 2,053,396 $ 1,894,521 $ 1,992,914 $ 2,017,160 $ 2,097,517 $ 2,066,872 $ 1,988,613 $ 1,993,497 $ 1,975,989 $ 2,069,205

Base Rate (Non-CILT & Subsidy) 1,289,098 1,153,020 1,172,346 1,190,841 1,158,951 1,119,097 1,100,694 1,050,873 1,017,852 994,167

Other Income 38,925 38,925 38,925 38,925 38,925 38,925 38,925 38,925 38,925 38,925

Total Revenues 3,381,419 3,086,465 3,204,184 3,246,925 3,295,394 3,224,894 3,128,232 3,083,295 3,032,765 3,102,297

YoY Growth 15% -9% 4% 1% 1% -2% -3% -1% -2% 2%

Operating Expenses

Fuel $ (1,225,002) $ (1,074,197) $ (1,082,634) $ (1,081,328) $ (1,170,317) $ (1,128,817) $ (994,547) $ (984,479) $ (640,293) $ (269,074)

Purchased Power (828,395) (820,324) (910,280) (935,831) (927,200) (938,055) (947,193) (962,144) (1,250,711) (1,638,926)

P3 Fixed Cost Recovery - - - - - - (46,874) (46,874) (84,984) (161,206)

Total Fuel & Purchased Power Expense (2,053,396) (1,894,521) (1,992,914) (2,017,160) (2,097,517) (2,066,872) (1,988,613) (1,993,497) (1,975,989) (2,069,205)

Labor Operating Expense (429,589) (463,494) (463,494) (463,494) (463,494) (463,494) (463,494) (463,494) (463,494) (463,494)

Non-Labor / Other Operating Expense (252,751) (250,418) (224,387) (226,376) (228,385) (230,413) (232,462) (234,531) (236,621) (238,732)

Bad Debt Expense (97,384) (70,923) (73,658) (74,650) (75,776) (74,139) (71,893) (70,850) (69,676) (71,291)

Total Non-Fuel Operating Expense (779,724) (784,835) (761,539) (764,521) (767,655) (768,046) (767,849) (768,875) (769,791) (773,517)

Non-Fuel/PP/CILT&Subsidy Expenses (779,724) (784,835) (761,539) (764,521) (767,655) (768,046) (767,849) (768,875) (769,791) (773,517)

Total Flow Through Expenses (Fuel/PP/CILT&Subsidy) (2,053,396) (1,894,521) (1,992,914) (2,017,160) (2,097,517) (2,066,872) (1,988,613) (1,993,497) (1,975,989) (2,069,205)

Total Expenses (2,833,120) (2,679,356) (2,754,452) (2,781,680) (2,865,172) (2,834,918) (2,756,462) (2,762,372) (2,745,780) (2,842,722)

EBITDA 548,299 407,109 449,732 465,245 430,221 389,976 371,769 320,923 286,985 259,574

DSCR ex-Securitization* 1.3 6.8 7.3 7.6 7.1 6.5 3.5 3.1 2.9 6.8

Depreciation Expense (356,153) (369,045) (382,402) (390,672) (398,556) (405,455) (411,940) (418,091) (423,385) (428,066)

Interest Expense (350,245) (40,129) (41,072) (39,920) (38,736) (37,518) (35,335) (31,565) (27,755) (25,064)

Net Income excluding Securitization (158,099) (2,064) 26,259 34,653 (7,070) (52,997) (75,506) (128,734) (164,155) (193,556)

Consolidated Income including Securitization 

SPV Pass Through Income for Securitization - 346,874 452,333 441,750 451,963 447,764 428,676 511,804 510,462 557,682

Securitized / Refinanced Debt Interest & Fees - (387,764) (443,748) (446,270) (448,124) (428,315) (378,671) (442,227) (441,267) (446,997)

Net Income including Securitization (158,099) (42,954) 34,844 30,132 (3,231) (33,548) (25,501) (59,157) (94,959) (82,872)

DSCR 1.3 1.9 1.8 1.8 1.7 1.7 1.5 1.4 1.3 1.4

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 37 of 97
Source: PREPA Internal Estimates

Balance sheet 

1) Cash and Equivalents does not include $148m of cash held at GDB

FINANCIAL	PROJECTIONS	– TEN	YEAR	FORECAST

37

Confidential - Subject to Further Revisions and Modifications

Balance Sheet (FY Ending) FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026

Assets

Cash and Equivalents 216,015 307,685 380,764 453,843 526,921 600,000 600,000 600,000 600,000 600,000

Accounts receivable 1,871,365 1,871,365 1,871,365 1,871,365 1,871,365 1,871,365 1,871,365 1,871,365 1,871,365 1,871,365

Inventories and Other 270,210 270,210 270,210 270,210 270,210 270,210 270,210 270,210 270,210 270,210

Total Current Assets 2,357,590 2,449,260 2,522,339 2,595,418 2,668,496 2,741,575 2,741,575 2,741,575 2,741,575 2,741,575

Total Non-Current and Restricted Assets 260,492 260,492 260,492 260,492 260,492 260,492 260,492 260,492 260,492 260,492

Utility plant, net 6,365,098 6,705,948 6,638,453 6,578,821 6,476,900 6,328,454 6,182,744 5,983,134 5,747,390 5,540,490

Deferred debits, net 149,008 149,008 149,008 149,008 149,008 149,008 149,008 149,008 149,008 149,008

Total Assets 9,132,188 9,564,709 9,570,293 9,583,738 9,554,896 9,479,529 9,333,819 9,134,209 8,898,465 8,691,565

Liabilities

Notes Payable to Banks 731,838 224,200 212,400 200,600 188,800 177,000 118,000 59,000 - -

Accounts payable and accrued liabilities 1,747,918 1,747,918 1,747,918 1,747,918 1,747,918 1,747,918 1,747,918 1,747,918 1,747,918 1,747,918

Customer deposits, including accrued interest 34,371 34,371 34,371 34,371 34,371 34,371 34,371 34,371 34,371 34,371

Total Current Liabilities 2,514,127 2,006,489 1,994,689 1,982,889 1,971,089 1,959,289 1,900,289 1,841,289 1,782,289 1,782,289

Total Current Liabilities from Restricted Assets 289,278 56,084 56,084 56,084 56,084 56,084 56,084 56,084 56,084 56,084

Power revenue bonds, net of unamortized debt discount 7,952,264 - - - - - - - - -

New Issue Capex Financing - 450,978 442,103 432,696 422,724 412,154 400,950 389,073 376,484 363,140

Securitized Debt (PREPARC) - 8,388,900 8,380,315 8,384,836 8,380,997 8,361,548 8,311,543 8,241,966 8,172,771 8,062,087

Other Long Term Liabilities 582,806 467,094 467,094 467,094 467,094 467,094 467,094 467,094 467,094 467,094

Total Long-Term Liabilities 8,535,069 9,306,972 9,289,512 9,284,625 9,270,814 9,240,796 9,179,587 9,098,133 9,016,349 8,892,320

Total Liabilities 11,338,474 11,369,545 11,340,285 11,323,598 11,297,987 11,256,168 11,135,959 10,995,506 10,854,722 10,730,693

Total Equity (2,206,286) (1,804,836) (1,769,992) (1,739,860) (1,743,091) (1,776,639) (1,802,140) (1,861,297) (1,956,257) (2,039,128)

-24% -19% -18% -18% -18% -19% -19% -20% -22% -23%

1

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 38 of 97
Cash Flow FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026

Operating

Net Income (158,099) (2,064) 26,259 34,653 (7,070) (52,997) (75,506) (128,734) (164,155) (193,556)

SPV Net Income (Securitization Only) - (40,890) 8,585 (4,521) 3,839 19,449 50,005 69,577 69,195 110,684

Accrued Interest on Capital Appreciation Bonds - 52,825 66,507 70,216 74,131 78,264 - - - -

Depreciation and amortization 356,153 369,045 382,402 390,672 398,556 405,455 411,940 418,091 423,385 428,066

CFO 198,054 378,916 483,753 491,020 469,455 450,170 386,439 358,934 328,425 345,195

Investing

Maintenance Capex $ (216,066) $ (176,248) $ (190,903) $ (190,161) $ (201,744) $ (180,100) $ (158,780) $ (135,205) $ (137,851) $ (127,722)

Investment Capex $ (63,152) $ (533,646) $ (124,004) $ (129,478) $ (83,491) $ (64,009) $ (94,700) $ (83,276) $ (49,790) $ (43,844)

Removal Costs $ - $ - $ - $ (11,400) $ (11,400) $ (12,900) $ (12,750) $ - $ - $ (49,600)

CFI $ (279,218) $ (709,894) $ (314,907) $ (331,039) $ (296,635) $ (257,009) $ (266,230) $ (218,481) $ (187,641) $ (221,166)

Financing

Principal payments on Fuel and GDB Lines of Credit - (11,800) (11,800) (11,800) (11,800) (11,800) (59,000) (59,000) (59,000) -

Principal payments on legacy debt and capex financing (8,372) (8,875) (9,407) (9,972) (10,570) (11,204) (11,876) (12,589) (13,344) -

Capex Financing Costs (4,594) - - - - - - - - -

Debt restructuring, securitization / proceeds from new debt (7,726,108) - - - - - - - - -

Principal payments on securitized debt (11,935) (75,093) (65,695) (77,970) (97,713) (50,005) (69,577) (69,195) (110,684) -

Principal write-down on securitized debt exchange / Refunding (162,552) - - - - - - - - -

Proceeds from issuance of debt / securitization 8,348,011 - - - - - - - - -

CFF 422,649 (95,767) (86,902) (99,742) (120,083) (120,209) (140,453) (140,784) (124,029) -

Net change in Cash before Short Term Loan $ 91,671 $ 73,079 $ 73,079 $ 73,079 $ 73,079 $ (0) $ (0) $ - $ 0 $ -

Cash Requirement (ST Loan Trigger) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

Short Term Loan / Revolver Drawdown - - - - - - - - - -

Short Term Loan Repayment - - - - - - - - - -

Short Term Loan Balance - - - - - - - - - -

Net change in Cash $ 91,6710 $ 73,0791 $ 73,0792 $ 73,0793 $ 73,0794 $ (0)5 $ (0)6 $ -

7 $ 08 $ -9

Cash and Equivalents (Closing) 307,685 380,764 453,843 526,921 600,000 600,000 600,000 600,000 600,000 -

Statement of cash flows

FINANCIAL	PROJECTIONS	– TEN	YEAR	FORECAST

38 Source: PREPA Internal Estimates

1) Cash and Equivalents does not include $148m of cash held at GDB

1

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 39 of 97
The Fiscal Plan, post measures, indicate that the Status Quo debt structure is not sustainable:

2018 2019 2020 2021 2022 2023 2024 2025 2026 2018 - 2022 Total

Gross revenues $3,433.3 $3,656.5 $3,688.7 $3,747.4 $3,672.7 $3,556.9 $3,595.1 $3,543.2 $3,660.0 $18,198.5 $32,553.8

Less: expenses (2,679.4) (2,754.5) (2,781.7) (2,865.2) (2,834.9) (2,756.5) (2,762.4) (2,745.8) (2,842.7) (13,915.6) (25,022.9)

EBITDA $754.0 $902.1 $907.0 $882.2 $837.7 $800.4 $832.7 $797.4 $817.3 $4,283.0 $7,530.8

Less: capital expenditure (709.9) (314.9) (331.0) (296.6) (257.0) (266.2) (218.5) (187.6) (221.2) (1,909.5) (2,803.0)

Cash flow avaiable before debt service $44.1 $587.2 $576.0 $585.5 $580.7 $534.2 $614.2 $609.8 $596.1 $2,373.5 $4,727.8

Plus: capex financing $418.8 ($35.9) ($35.9) ($35.9) ($35.9) ($35.9) ($35.9) ($35.9) ($35.9) $275.1 $131.4

Less: status quo debt service (952.2) (950.6) (886.8) (864.5) (796.7) (640.4) (640.5) (640.6) (640.7) (4,450.7) (7,012.9)

Surplus / (shortfall) ($489.3) ($399.3) ($346.7) ($314.9) ($251.9) ($142.1) ($62.2) ($66.7) ($80.5) ($1,802.2) ($2,153.7)

Debt Sustainability Analysis

39

Cash flow available for debt service – Status Quo ($ in millions)

PREPA has reached a consensual agreement (the “RSA”) with its creditors that addresses the 

impending shortfall, reducing the debt service cost meaningfully over the Fiscal Plan Period

1) Illustrative capital expenditure financing assumption based on AOGP

2) Status Quo includes prior relendings, assumes seven-year-term-out of Fuel Lines at 12%

3) Assumes PREPA’s access to the capital markets in years 2023 and thereafter. Provides ~$1.0bn benefit. Assuming no access to capital markets, transition charge will be higher to offset 

additional funding need

(1)

Cash flow available for debt service – under proposed RSA and assuming access to capital markets ($ in millions)(3)

(2)

(1)

2018 2019 2020 2021 2022 2023 2024 2025 2026 2018 - 2022 Total

Gross revenues $3,433.3 $3,656.5 $3,688.7 $3,747.4 $3,672.7 $3,556.9 $3,595.1 $3,543.2 $3,660.0 $18,198.5 $32,553.8

Less: transition charge (346.9) (452.3) (441.7) (452.0) (447.8) (428.7) (511.8) (510.5) (557.7) (2,140.7) (4,149.3)

Less: expenses (2,679.4) (2,754.5) (2,781.7) (2,865.2) (2,834.9) (2,756.5) (2,762.4) (2,745.8) (2,842.7) (13,915.6) (25,022.9)

Less: capital expenditure (709.9) (314.9) (331.0) (296.6) (257.0) (266.2) (218.5) (187.6) (221.2) (1,909.5) (2,803.0)

Cash flow avaiable before debt service ($302.8) $134.8 $134.2 $133.6 $133.0 $105.5 $102.4 $99.3 $38.4 $232.8 $578.5

Plus: capex financing $418.8 ($35.9) ($35.9) ($35.9) ($35.9) ($35.9) ($35.9) ($35.9) ($35.9) $275.1 $131.4

Less: debt service remaining at PREPA (24.4) (25.8) (25.2) (24.6) (24.0) (69.6) (66.5) (63.4) (2.5) (123.9) (325.9)

Surplus / (shortfall) $91.7 $73.1 $73.1 $73.1 $73.1 ($0.0) – – – $384.0 $384.0

FINANCIAL	PROJECTIONS	– DEBT	SUSTAINABILITY

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 40 of 97
V. Restructuring Support Agreement (“RSA”)

40

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 41 of 97
41

§ AAFAF and PREPA have recently engaged in negotiations with the Supporting Creditors to the RSA regarding 

modifications to the RSA that would benefit PREPA, as well as its client base and the economy:

• $2.2bn in debt service savings from 2018 to 2022 as compared to contractual terms of debt

• Individual rate payer debt service charge savings of 36% for five years over the original RSA

• Allows PREPA to take steps to upgrade base maintenance, modernize the utility, and attract capital

§ Agreement in principle reached regarding modifications to the RSA

• Restructuring of the debt through Title VI of PROMESA

• RSA is intended to accommodate a potential restructuring under Title III of PROMESA for the non-financial 

obligations

§ Revisions to the RSA are currently being negotiated with the goal of being in a position to complete solicitation of 

Title VI process by July 1, 2017 

New administration achieved substantial 5-year liquidity relief over original RSA

RSA	– OVERVIEW	

Anticipated Process

üComplete the revisions to the RSA

üExecute 19th Amendment to Trust Agreement to raise 

threshold for remedies exercise to assure no receivership 

action is viable during the RSA Support Period

üPresent the RSA as modified to the FOMB

üPrepare for Title VI process

üAgree on form of documentation for all of the underlying 

modifications to the RSA

üCommence solicitation of Qualifying Modifications

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 42 of 97
Savings from modified RSA

42

§ ~$1.4bn debt service relief in first five years

§ ~$837m debt reduction

§ ~$90m Relending Commitment

§ ~$600m debt service relief in first five years

§ ~$240m debt service relief in first five years

§ $145m Relending Commitment

§ Surety policy to establish Securitization Debt Service 

Reserve Fund (DSRF)

Bondholders

National /

Assured

Fuel Lines 

Lenders

§ ~$50m debt service relief in first five years

§ ~$14m debt reduction

§ $42m Relending Commitment

Syncora

Debt service relief

+$2,200m 

Debt reduction

+~$850m 

Relending

+~$280m 

RSA	– SUSTAINABLE	CAPITAL	STRUCTURE

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 43 of 97
The ending balances below show changes that occur prior to and at the exchange date of the SPV transaction. The PREPARC 

debt balances are projected to transfer from PREPA to PREPARC on closing date(2)

DESCRIPTION OF PRINCIPAL CHANGES

Insured Bonds: Pre-transaction balance includes July 2017 

maturities. Syncora pro forma balance reflects discount on 

exchange on 2025 – 2027 bonds

AHG and other Bonds: Pre-transaction balance reflects July 

2017 maturities and accrued interest through closing date.(2) Pro 

forma balance reflects 15% haircut on exchange bonds

Relending Bonds: Pre-transaction balance includes assumed 

July relending from forbearing lenders and accrued interest 

through closing date(2)

After closing of the RSA transaction, PREPA’s current debt balance is 

reduced by ~$850m(1)

1) Excluding the impact of new SPV capital 43

2) Q3 calendar year 2017 closing date

RSA	– ANALYTICS

12/31/2016

Balance at PREPA

Pre

transaction Pro forma

Assured $840 $837 $837

National 1,246 1,151 1,151

Syncora 164 126 112

Insured Bonds $2,250 $2,115 $2,101

AHG and other $5,634 $5,582 4,745

Relending bonds 375 657 657

New money SPV capital – – 350

Total Bonds $6,009 $6,239 $5,751

DK / Solus / Marathon $496 $496 496

Scotia 200 200 200

GDB 36 36 36

Total Fuel Lines + GDB $732 $732 $732

Total outstanding $8,991 $9,085 $8,584

Bridge

Assured ($3) –

National (95) –

Syncora (38) (14)

AHG and other (52) (837)

Relending bonds 282 –

New money SPV capital – 350

DK / Solus / Marathon – –

PREPARC ending balance $95 ($501)

Scotia – –

GDB – –

PREPA balance – –

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 44 of 97
44

The Fiscal Plan assumes that after a period of stabilization post the RSA, PREPA reestablishes its access to the capital markets by the end of 2022 by 

achieving investment grade status on bonds within the SPV

§ Increased cash reserves 

§ Allows for the refinancing of existing SPV bonds subject to a 5-year no call period in year 6 with investment grade equivalent interest rates 

§ Allows for additional debt issuances to offset some of scheduled amortization in years 6 through 10 into similar investment grade rated securities

Capital market access is dependent on PREPA and PREPARC achieving an investment grade rating, which in turn is dependent on a series of factors that 

include, but are not limited to, the following:

§ Successful implementation of the operational enhancements included in Fiscal Plan over the next five years

§ Stabilization of Puerto Rico’s economy

§ Execution of the RSA and additional restructuring

§ Establish market confidence in the securitization vehicle

§ Allow for cash reserves to build to $600m 

RSA scenario assumes PREPA regains access to the capital markets

RSA	– ASSUMPTIONS

$138 $180 $163 $261 

$643 

$308 

$381 

$454 

$527 

$600 $600 

–

$200

$400

$600

$800

2018 2019 2020 2021 2022 2023 2024 2025 2026

New SPV debt issue PREPA cash

Capital market access restored Stabilization and re-establishment of 

PREPA’s access to the capital markets 

assumed during first 5 years 

Projected cash balance ($ in millions)

Represents 

bonds callable 

after 5 years

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 45 of 97
RSA-implied rate projections

Notes:

1) Rates assume an August 2017 transaction

2) FY 2017 rate assumes PREC approved revenue requirement excluding PREPARC revenue, and including corrections and updates discussed with EC Staff

3) Assumes the bond exchange is executed in August 2017, PREPARC is established and begins billing the Transition Charge on September 1, 2017, the Transition Charge 

includes both a fixed and volumetric component

RSA	– RATE	PROJECTIONS

Rates fluctuate over time primarily due to variations in the assumed levels of investment and debt service as well as the 

assumed price of fuel. Variations in non-fuel O&M also have a minor impact in the rate fluctuations over time

45

21.0 19.9

21.7

23.0

24.2 24.6 24.2 24.3 24.2 24.9

2.8

3.1

3.2

3.3

3.7 3.6 4.1 4.1

4.5

0

5

10

15

20

25

30

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Cents per kWh

PREPARC Rate

PREPA Rate

Required Rate*

Source: PREPA Internal Estimates

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 46 of 97
46

RSA	– SUSTAINABLE	CAPITAL	STRUCTURE

This chart shows original PREPA debt service versus RSA terms and return to capital market access in 2023

($ in millions)

5 Year Cumulative (2018 – 2022) Cumulative debt service (2018 – 2026)

PREPA status quo $4,451

RSA terms 2,265

Savings $2,186

Pro forma capital structure per modified RSA

–

$250

$500

$750

$1,000

RSA terms (excl. refinance) PREPA status quo RSA terms (incl. refinance)

PREPA status quo $7,013

RSA terms (incl. refinance) 4,475

RSA terms (excl. refinance) 5,508

Savings (incld. refinance) $2,538

Savings (excld. refinance) 1,505

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 47 of 97
VI. Adequate Liquidity

47

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 48 of 97
Based on current projections the Creditors to the RSA will provide new capital in an amount based on the adequate liquidity as projected by the 

fiscal plan 

Operating cash projections

48

Operating cash by period

Source: 13-week cash flow as of 4/18/17 and 2017 projections

Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17

PREPA cash flow (before Debt Service & restructuring) $23 $8 ($14) $22 $13 $49 $15 $14 $29

Professional fees (7) (4) (4) (4) (4) (1) (1) (1) (1)

Fuel line interest (4) (4) (4) (4) (4) – – – –

Bond interest (11) – (88) – – – – – –

Bond maturities – – (86) – – – – – –

Net cash flow $1 $1 ($195) $14 $5 $48 $14 $13 $28

Beginning operating cash balance $412 $412 $413 $217 $232 $236 $285 $299 $312

Change in cash 1 1 (195) 14 5 48 14 13 28

Ending operating cash balance $412 $413 $217 $232 $236 $285 $299 $312 $340

Operating cash flow forecast assuming July relendings by Forbearing Lenders

–

$100

$200

$300

$400

$500

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17

Latest 13-week cash flow FY17 Budget

ADEQUATE	LIQUIDITY	– SUSTAINABLE	CAPITAL	STRUCTURE

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 49 of 97
Sources

Balance sheet cash at transaction $285

New Money SPV capital 350

New Undrawn revolver 165

AOGP project financing 500

Total sources $1,300

Uses

AOGP project financing 500

Cash on balance sheet $235

Undrawn revolver 165

Minimum liquidity $400

SIF top up 100

Securitization DSRF deposit 83

Transaction costs 47

Infras. & operational funding need 170

Total uses $1,300

RSA cash sources and uses – Adequate Liquidity

49

§ Estimated operating cash at transaction date of 

$285m (excludes ~$147m in GDB deposits)

§ Assumes minimum cash on the balance sheet of 

~$400m which represents ~15% of average 

operating expenses for 2018 and 2019

§ Assumed infrastructure and operational need 

funding of ~$170m

§ Excludes any amounts relating to pension catch 

up payments / under funding

ADEQUATE	LIQUIDITY	– SUSTAINABLE	CAPITAL	STRUCTURE

Illustrative cash sources and uses (1)

Notes:

1) New Money SPV capital, Revolver and AOGP funding is not committed and thus must be available for PREPA to have Adequate Liquidity

2) Projected as of September 2017

3) Minimum liquidity represents ~15% of 2018 and 2019 opex spending

4) SIF top-up to $100m limited to $50m from New Money SPV capital

(2)

(3)

(4)

The table to the right presents the illustrative 

cash sources and uses as of a calendar year Q3 

2017 transaction date

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 50 of 97
13-week cash flow as of 4/18/2017 

50

ADEQUATE	LIQUIDITY	– SUSTAINABLE	CAPITAL	STRUCTURE

Source: PREPA Internal Estimates

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

W eek ending 03/31 04/07 04/14 04/21 04/28 05/05 05/12 05/19 05/26 06/02 06/09 06/16 06/23 06/30 07/07 13 W eeks

1 Receipts

2 C ustomer collections $ 50.6 $ 60.4 $ 64.1 $ 76.8 $ 76.8 $ 65.4 $ 59.9 $ 59.9 $ 59.9 $ 50.2 $ 63.3 $ 60.0 $ 60.0 $ 60.0 $ 70.1 $ 826.1

3 Receipts from Bond Issuance - - - - - - - - - - - - - - -

4 Reimbursement from construction fund - - - - - - - - - - - - - - -

5 O ther income - 0.1 - - - - - - - - - - - - - -

6 T otal Receipts $ 50.6 $ 60.4 $ 64.1 $ 76.8 $ 76.8 $ 65.4 $ 59.9 $ 59.9 $ 59.9 $ 50.2 $ 63.3 $ 60.0 $ 60.0 $ 60.0 $ 70.1 $ 826.1

7 Disbursements

8 Employee Disbursements

9 Payroll $ - $ 8.2 $ - $ 9.0 $ - $ 9.0 $ - $ 9.0 $ - $ 9.0 $ - $ 9.0 $ - $ 9.0 $ - $ 54.0

10 Social security - 1.9 - 2.2 - 2.2 - 2.2 - 2.2 - 2.2 - 2.2 - 13.2

11 Payroll taxes - 0.9 - 1.2 - 1.2 - 1.2 - 1.2 - 1.2 - 1.2 - 7.2

12 C ontributions to employee benefit programs 6.8 2.3 - - 9.2 - 2.5 - 2.5 6.6 2.5 - 2.5 7.0 2.5 35.5

13 Medical benefit costs - 1.8 - - - 7.5 - - - - 7.5 - - - 7.5 22.5

14 W orkers compensation / disability funding - - - - - - - - - - - - - - - -

15 Subtotal Employee Disbursements $ 6.8 $ 15.0 $ - $ 12.4 $ 9.2 $ 19.9 $ 2.5 $ 12.4 $ 2.5 $ 19.0 $ 10.0 $ 12.4 $ 2.5 $ 19.4 $ 10.0 $ 132.4

16 Energy Purchases

17 Purchases of power from A ES $ - $ 8.6 $ 8.6 $ 8.6 $ - $ 8.5 $ 6.4 $ 6.4 $ - $ - $ 11.8 $ 8.8 $ 8.8 $ 10.8 $ - $ 78.6

18 Purchases of power from EC O - 7.2 7.5 7.5 7.5 7.1 7.1 7.1 7.1 - 7.5 7.5 7.5 7.5 8.6 89.6

19 Purchase of power from renewable sources 0.1 - - 10.1 - - - 9.8 - - - 9.4 - - - 29.3

20 Fuel purchases - fleet and storage - 0.4 - 1.5 - - - 1.5 - - - 1.5 - - - 4.5

21 Fuel purchases - Petrobras / Freepoint 19.2 8.4 15.3 23.0 8.0 15.0 15.8 7.4 19.0 11.1 8.0 4.2 8.3 19.4 6.1 160.8

22 Fuel purchases - Puma 4.7 7.0 1.1 4.8 9.2 3.5 3.5 5.4 3.9 4.2 7.0 4.8 7.1 9.2 3.5 67.0

23 LNG purchases 6.0 6.0 6.0 4.7 4.7 4.7 4.7 5.8 5.8 5.8 5.8 4.7 4.7 4.7 4.7 66.7

24 Subtotal Energy Purchases $ 30.0 $ 37.7 $ 38.4 $ 60.1 $ 29.4 $ 38.8 $ 37.4 $ 43.3 $ 35.8 $ 21.1 $ 40.1 $ 41.0 $ 36.5 $ 51.7 $ 22.9 $ 496.4

25 O ther Disbursements

26 Interest on bonds $ - $ 11.1 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 2.2 $ 2.2

27 Interest payments on lines of credit - 4.3 - - - 4.2 - - - 4.2 - - - - 4.2 12.6

28 Insurance premiums - - - - - - - - - - - 5.0 - - - 5.0

29 Internally G enerated Funds C ontributed to C IP - - - 35.0 25.0 - - - - - - - - - - 60.0

30 Employee expense reimbursements (per diem) 0.9 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 10.4

31 A dditional accounts payable 4.2 2.1 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 45.5

32 Funds transferred for debt payments - - - - - - - - - - - - - 174.0 - 174.0

33 Subtotal O ther Disbursements $ 5.1 $ 18.2 $ 4.3 $ 39.3 $ 29.3 $ 8.5 $ 4.3 $ 4.3 $ 4.3 $ 8.5 $ 4.3 $ 9.3 $ 4.3 $ 178.3 $ 10.7 $ 309.7

34 Restructuring Expenses

35 Professional Fees $ 0.0 $ 0.2 $ - $ 6.6 $ 0.1 $ - $ - $ - $ 3.7 $ - $ - $ - $ - $ 3.7 $ - $ 14.1

36 Subtotal Restructuring Expenses $ 0.0 $ 0.2 $ - $ 6.6 $ 0.1 $ - $ - $ - $ 3.7 $ - $ - $ - $ - $ 3.7 $ - $ 14.1

37 T otal Disbursements $ 42.0 $ 71.1 $ 42.7 $ 118.4 $ 68.0 $ 67.2 $ 44.3 $ 60.0 $ 46.4 $ 48.6 $ 54.4 $ 62.7 $ 43.3 $ 253.1 $ 43.6 $ 952.6

38 Net Cash Flow $ 8.6 $ (10.7) $ 21.4 $ (41.6) $ 8.8 $ (1.8) $ 15.6 $ (0.2) $ 13.5 $ 1.5 $ 8.9 $ (2.7) $ 16.6 $ (193.1) $ 26.5 $ (126.5)

39 O pening Balance $ 494.6 $ 503.2 $ 492.5 $ 513.9 $ 472.3 $ 481.1 $ 479.3 $ 494.9 $ 494.7 $ 508.2 $ 509.7 $ 518.6 $ 515.9 $ 532.6 $ 339.5 $ 492.5

40 Net C ash Flows 8.6 (10.7) 21.4 (41.6) 8.8 (1.8) 15.6 (0.2) 13.5 1.5 8.9 (2.7) 16.6 (193.1) 26.5 (126.5)

41 C onstruction Fund Borrowings - - - - - - - - - - - - - - - -

42 C onstruction Fund Repayments - - - - - - - - - - - - - - - -

43 Ending Balance $ 503.2 $ 492.5 $ 513.9 $ 472.3 $ 481.1 $ 479.3 $ 494.9 $ 494.7 $ 508.2 $ 509.7 $ 518.6 $ 515.9 $ 532.6 $ 339.5 $ 366.0 $ 366.0

44 CIP Balances

45 Beginning Balance $ 62.0 $ 56.7 $ 54.3 $ 47.6 $ 76.0 $ 79.3 $ 72.7 $ 66.1 $ 59.4 $ 52.8 $ 47.5 $ 42.1 $ 36.8 $ 31.5 $ 26.2 $ 54.3

46 Funds Received from G eneral Fund - - - 35.0 25.0 - - - - - - - - - - 60.0

47 T ransfers to G eneral Fund - - - - - - - - - - - - - - - -

48 Receipts from Bond Issuance - - - - - - - - - - - - - - - -

49 C IP Disbursements (5.4) (2.4) (6.6) (6.6) (21.6) (6.6) (6.6) (6.6) (6.6) (5.3) (5.3) (5.3) (5.3) (5.3) (6.6) (94.7)

50 Ending CIP Balance $ 56.7 $ 54.3 $ 47.6 $ 76.0 $ 79.3 $ 72.7 $ 66.1 $ 59.4 $ 52.8 $ 47.5 $ 42.1 $ 36.8 $ 31.5 $ 26.2 $ 19.6 $ 19.6

51 Construction and G eneral Fund Cash Balance $ 559.9 $ 546.8 $ 561.5 $ 548.3 $ 560.5 $ 552.0 $ 561.0 $ 554.1 $ 561.0 $ 557.2 $ 560.7 $ 552.7 $ 564.1 $ 365.7 $ 385.5

52 Amounts Borrowed from CIP for G eneral Fund - - - - - - - - - - - - - -

Memo:

C onstruction and G eneral Fund C ash Balance $ 559.9 $ 546.8 $ 561.5 $ 548.3 $ 560.5 $ 552.0 $ 561.0 $ 554.1 $ 561.0 $ 557.2 $ 560.7 $ 552.7 $ 564.1 $ 365.7 $ 385.5

Less: deposits at G DB (148.3) (148.3) (148.3) (148.3) (148.3) (148.3) (148.3) (148.3) (148.3) (148.3) (148.3) (148.3) (148.3) (148.3) (148.3)

Ending balance excl deposits at GDB $ 411.6 $ 398.5 $ 413.3 $ 400.0 $ 412.2 $ 403.8 $ 412.7 $ 405.9 $ 412.7 $ 408.9 $ 412.5 $ 404.5 $ 415.8 $ 217.4 $ 237.3

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 51 of 97
VII. Detailed Investment Program

51

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 52 of 97
§ PREPA’s 10-year capital investment program currently has planned for $2.5bn of PREPA capital outlays (pay-go) for T&D 

complimented with public-private partnerships investing $1.68bn in new generation, and ~$400m in external financing for AOGP (TBD) 

§ The T&D maintenance and investment program is intended to transform Puerto Rico’s system into a modern grid capable of handling 

variable load and generation from renewables and DG while maintaining high level of safety and reliability

10-year capital investment program totaling $4.66 billion

52

§ AOGP remains a key milestone investment in 

Puerto Rico’s shift to clean, low-cost, and rapid 

response natural gas generation, and is a key 

component of PREPA’s MATS compliance 

strategy

§ The P3 Generation investment initiative is 

designed to create competitive bidding 

opportunities for private developers with deep 

experience in owning and operating power 

generation facilities

$470 

$2,514 

$1,682 

$-

$500 

$1,000 

$1,500 

$2,000 

$2,500 

$3,000 

$3,500 

$4,000 

$4,500 

$5,000 

10-year Capital Investment Program Total

Public Private 

Partnership (P3) 

Generation

T&D Investment and 

Maintenance

Aguirre Offshore Gas 

Port (AOGP)

INVESTMENT	PROGRAM	– OVERVIEW

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 53 of 97
Public-Private Partnerships enabling a utility of the future

Source: PREPA Planning Department. April 8, 2017. 53

§ As part of its transition to a sustainable utility of the 

future, the revised investment schedule envisioned in the 

long term financial projections begins PREPA’s pivot 

from a generation owner and operator to a Distribution 

System Operator (DSO) model

§ The primary driver is enabling private investment in 

generation through competitive procurement

§ Retirement of less efficient units, repowering of existing 

assets, and Public-Private Partnership investment will 

reduce PREPA’s overall fuel expense, system heat rate, 

exposure to volatile fuel prices and provide system 

flexibility to better integrate renewables, in compliance 

with health and environmental requirements

8,200

8,400

8,600

8,800

9,000

9,200

9,400

9,600

Total System Heat Rate 

(mmBTU/kWh)

Expedited Repowering Infrastructure Expansion (PROMESA)

P3 generation 

comes online

INVESTMENT	PROGRAM	– P3

$-

$500 

$1,000 

$1,500 

$2,000 

$2,500 

$3,000 

Capital Investment

Millions

Retirements

Transmission 

Upgrades

Costa Sur 

5&6

Aguirre 2 

Steam

Aguirre 1 

Steam

Aguirre 2 CC 

Repower

Aguirre 1 CC 

Repower

Jul-17 Jul-18 Jul-19 Jul-20 Jul-21 Jul-22 Jul-23 Jul-24 Jul-25 Jul-26

AOGP Online

New Generation at Palo Seco (SCC-800 Class)

San Juan 9&10 Retirement

Palo Seco 3&4 Designated to Limited Use

Aguirre 1 CC Unit Gas Turbine Replacement/Repower

Aguirre 2 CC Unit Gas Turbine Replacement/Repower

Aguirre 1 Steam Unit Replacement (H class)

Aguirre 2 Steam Unit Replacement (H class)

Aguirre 1 Steam Unit Retirement

Aguirre 2 Steam Unit Retirement

Costa Sur 5&6 Steam Units Replacement (H class)

Costa Sur 5&6 Steam Units Retirement

Transmission Upgrades

Additional Renewables Capacity Generic Projects

Development, 

Permitting and 

Financing

EPC

Retirement or 

Limited Use

606.3MW 5.7MW

13.69¢/kWh

4.3MW

14.00¢/kWh

7.3MW

12.5¢/kWh

4.7MW

12.79¢/kWh

7.6MW

13.08¢/kWh

5.5MW

13.38¢/kWh

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 54 of 97
§ PREPA’s needed infrastructure upgrades and new projects generally qualify as “Critical Projects” under PROMESA’s Title 

V, Section 501(2) – as projects intimately related to addressing an emergency whose approvals, considerations, 

permitting and implementation must be expedited and streamlined 

§ They also meet the statutory definition of “Emergency”, Section 501(5) – which includes any event or grave problem of 

deterioration in the physical infrastructure for the rendering of essential services to the people, or that endangers the 

life, public health or safety of the population or of a sensitive ecosystem – under Act 76-2000 – including problems in the 

physical infrastructure for energy, water, sewer and solid waste infrastructure

§ Projects anticipated by PREPA comply soundly with Section 503’s required criteria for “Critical Projects”, including: 

• The impact of the infrastructure project on an emergency condition 

• The resulting environmental and economic benefits 

• Reduction in reliance on oil for electric generation in Puerto Rico 

• Improvements in performance of energy infrastructure and overall energy efficiency 

• Expediting diversification and conversion of fuel sources for electric generation from oil to natural gas and 

renewables in Puerto Rico 

• Promoting the development and use of energy sources found in Puerto Rico

• Contributing to transitioning to privatized generation capacities

Energy infrastructure upgrade – highest priority under Title V

54

INVESTMENT	PROGRAM	– INFRASTRUCTURE

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 55 of 97
§ PREPA’s priority for identified infrastructure projects include analysis of: 

• How the project addresses the infrastructure gap/emergency need

• Cost-benefit ratio 

• Long term economic growth 

• Time to realization / Shovel ready

• Public/private funds requirements 

• Alignment with Government’s policy goals, FOMB certified Fiscal Plan and Budgets 

Energy infrastructure upgrade – priority criteria / delivery model

PREPA’s energy infrastructure projects are of the highest priority to ensure 

updated, safe, compliant, reliable and efficient energy services to the people of 

Puerto Rico and its business community

§ PREPA’s proposed fiscal plan anticipates a PMO structure to improve delivery efficiency by: 

• Improving investment delivery efficiency through centralization of delivery and expedited permitting

• Applying alternative delivery models (e.g., DBF, DBFOM) 

• Coordinating PROMESA and central government support – Revitalization Coordinator, Fortaleza, AAFAF and the 

Puerto Rico P3 Authority

55

INVESTMENT	PROGRAM	– INFRASTRUCTURE

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 56 of 97
§ PREPA’s long-term investment program requires upgrades for plant efficiencies, pivoting the generation mix to natural 

gas and renewables, and full MATS compliance. PREPA will seek to implement this program by leveraging P3s

§ In accordance with the current consent decree with the EPA, PREPA is to bring its power plants into compliance with 

environmental requirements

§ The generation portfolio cost requirements are $1.68bn during 2018-2026 timeframe

§ Total new P3 generation in 2026 will be approximately 30% of total system generation

Pivoting Puerto Rico’s generation mix

Pivoting the Generation Mix – FY2018 vs. FY2026

FY2026 (1)

1) Load Forecast assumption consistent with revised economic projections from FOMB and updated investment plan 56

INVESTMENT	PROGRAM	– DIVERSIFICATION	

FY2018

Oil

45%

Coal 

17%

Natural 

Gas

34%

Hydro 

1%

Renewables

3%

Oil

2%

Coal 

22%

Natural Gas

57%

Hydro 

1%

Renewables

18%

Source: PREPA Internal Estimates

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 57 of 97
VIII. New Rate Structure 

57

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 58 of 97
Costs

§ This mechanism would allow 

PREPA to recover from 

customers only its real and 

necessary costs

PREPA’s new rate structure: Seeking FRM

58

NEW	RATE	STRUCTURE	– FRM

PREPA’s RSA contemplates a Formula Rate Mechanism (“FRM”) to annually update and reconcile PREPA’s rates

Key Challenges

§ PREC has allegedly assumed extensive operating control over PREPA, including areas where PREPA is 

implementing government policy or the approved government Fiscal Plan 

§ There is no robust reconciliation process to address ongoing changes; rather, adjustments for changes require 

extraordinary action or PREC permission prolonging processes and timelines

§ The PREC exercises jurisdiction over PREPA budgets even when approved by the FOMB and unduly 

impacts relevant timelines 

§ PREC has denied PREPA’s requests to reconsider its Order regarding some aspects of the annual rate update 

mechanism, including budgeting and rate adjustment timelines 

§ PREPA has appealed such denial to the P.R. Appeals Court and is in the process of developing a further 

regulatory strategy to address certain of these challenges

Annual Rate Update Process and Challenges with the PREC: PREC rejected the PREPA proposal, adopting instead a proposal that 

effectively puts PREC in the position of controlling PREPA’s budgets and priorities, in addition to reviewing its rates

Liquidity

§ It helps PREPA address current 

challenges resulting from having 

no access to capital markets, 

limited reserves, essential 

investment needs, needed 

environmental compliance 

investments and avoid/minimize 

historic undue political influences

Sales

§ Annual reconciliations address 

changes in sales/demand, 

protects customers from forecast 

errors and remove disincentives 

from reaching efficiency gains 

and renewable energy 

deployment

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 59 of 97
Revitalizing PREPA requires addressing challenges related to providing safe and reliable service, at the least cost possible and

through the most efficient and environmentally sound approach available:

PREPA rate design challenges & opportunities: Embracing new technology

§ Support and promote new technologies, and protect essential revenues

§ Provide customers with rational, economic price signals that discourage uneconomic bypass and avoid cost shifts 

and subsidies that harm customers and the economy as a whole

59

In addition to continuing to lower cost and improved reliability and efficiency, utilities facing such circumstances can use 

established regulatory tools to:

NEW	RATE	STRUCTURE	– TECHNOLOGY

Proposed Initiatives

Embrace new

technologies

§ Distributed generation, cogeneration, and renewable generation are rapidly expanding

§ PREPA must plan for and accommodate that expansion and also prepare for other advanced 

technologies such as storage and microgrids

Transform and 

revitalize 

PREPA’s 

systems and 

structure

§ Remaking PREPA requires forward-looking investment

§ Private and third-party capital is key, but PREPA also needs adequate revenues and liquidity

in order to support a reliable, resilient, and capable grid which is the foundation of a worldclass utility

§ All these new technologies have significant costs, and may not provide direct revenue back to 

PREPA to pay for these costs

Manage 

declining load 

and potential 

revenue loss

§ PREPA has lost load and faces further loss of significant load due to economic conditions and, 

in some cases, new technologies. For example, customer generation can significantly reduce 

PREPA’s revenues and cost base and threaten to “strand” investments and costs

§ Without adequate revenues and liquidity, PREPA’s ability to invest in its transformation will 

be limited

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 60 of 97
§ Adopt economically efficient rate designs. Uneconomic incentives to bypass utility supply or delivery can be avoided:

• Properly reflect fixed and volumetric costs in rates, and properly assign costs to classes.

• Move more costs to fixed values, than to volumetric costs to reduce volatility and discourage inefficient bypass.

• Consider unbundling delivery and supply rates and costs. This can help protect essential grid cost recovery and

preserve funding for gird improvement and “future utility” goals.

• Rates that discount delivery prices without reducing grid costs must be carefully designed to promote the desired

social goal (e.g., promoting renewable energy) without stranding grid costs or creating cross subsidies that hurt

customers least able to respond, who are often low income or low use.

§ Use targeted rate tools. Customer or group-specific rate tools such as economic development rates, load retention rates,

and special customer class (e.g., very high voltage, interruptible) rates can reduce the risk of uneconomic load loss and

attract new load to areas where capacity (T&D or generation) is available at little marginal cost. This helps the utility and

the economy.

§ Explicit stranded cost charges. Impose non-bypassable charges on customers designed to recover identified categories

of stranded costs. The Transition Charge can be thought of as such a charge, and PREC was sympathetic to that rationale

since otherwise remaining customers pay. In extreme cases, stranded cost can even be recovered from customers who go

entirely off grid or who depart. In some cases, a non-bypassable charge can reduce the incentive to depart as a means of

avoiding responsibility for stranded costs.

There are well-understood ratemaking and regulatory responses used by utilities faced with serious threats of uneconomic 

bypass and stranded costs:

Rate design challenges and opportunities: Stranded costs recovery

NEW	RATE	STRUCTURE	– REGULATORY	OPTIONS

60

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 61 of 97
CILT reform

§ Moving of all the municipal public lighting to the subsidies rider in the customer bill

§ Removal of all municipal for profit entities from receiving an electric service credit from the CILT

§ Establishing a total consumption (kWh) cap on the municipal CILT, which will be reduced by 15% (in 

three fiscal years, 5% each)

§ The municipality will pay for any excess, plus the for profit ventures

§ The CILT adjustment process itself has not begun in full due to PREC regulations and implementation 

obstacles, in addition to issues presented by municipalities disputing the validity of the for profit claim

Beyond this, PREPA has no authority to further reduce the CILT values. PREPA, under the new rate structure, will 

recover the cost of CILT via the CILT rider in customer bills. Any additional reductions or amendments would 

require legislation

61

NEW	RATE	STRUCTURE	– CILT

As established in Act 57-2014 and Act 4-2016, there are significant changes in the treatment of the Municipal 

Contribution in Lieu of Taxes (CILT)

These changes involve...

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 62 of 97
IX. Operational Performance Improvements

62

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 63 of 97
Situation Encountered Actions Taken

Fuel and

Generation

§ Limited forecasting, inventory controls and dispatch 

coordination, unsuitable terms related to fuel sourcing 

and unusually high spinning reserve levels

§ Fuel savings driven by renegotiation of natural gas contract for Costa Sur 

(~$33m), reduction of forced outages (~$29m), normalizing spinning 

reserves (~$25m), roll-out of S&OP process (~$23m), and enhanced forecast 

tool and inventory reduction (~$4m)

Customer

Service

§ Deficient government and general customer collection 

practices, losses related to theft and non-technical 

issues, and a disappointing customer experience

§ Run-rate annual customer service savings of ~$77m driven by roll-out of 

strict collections program, improved training of employees and use of 

external call center for additional support

Indirect

Procurement

§ Absence of efficient procurement processes and 

inventory management, and underutilized fleet and lack 

of real estate strategy

§ Run-rate annual procurement savings of ~$23m driven by improved 

inventory management and control process, fleet upgrade program and 

development of real estate strategy with aid from external experts

Employee

Related

§ Loss of productivity regimented by strict work rules, 

unenforced safety protocols and costly medical benefits 

for employees

§ Annual employee related savings driven by flexible work shifts, assessment 

by 3rd party expert on improvement opportunities and improvements to health 

plan utilization controls and service metrics

Organization 

Related

§ Unsustainable employee management practices driven 

by faulty succession planning and failure to reshape the 

employee hierarchy and alleviate understaffed teams

§ Reduction of succession risk by establishing alternative strategies for critical 

role replacement and new governance related to operational and staffing 

priorities

Information 

Technology

§ Inadequate information security controls, outdated 

technical infrastructure and an unreliable reporting 

process

§ Implementation of increased security measures to protect network and critical 

applications, development of new documentation standards and automated 

KPI reporting dashboard

Management is committed to continuing on the operational restructuring path

§ PREPA management is committed to continuing the path towards operating efficiently and implementing “best in class” operational and 

organizational measures, while leveraging the private sector and available technological solutions

§ In the past years, PREPA has implemented initiatives and internal controls that have generated both one-time and projected recurring 

improvements

• PREPA has taken action in areas such as fuel procurement & controls, reduction of non-technical losses, improved collections, 

procurement and inventory control, potentially generating projected annual savings of approximately $254m(1)

• One-time incremental cash generation initiatives implemented to date of approximately $271m

63 1) New management is in the process of validating the annual projected savings identified by its prior restructuring advisor

OPERATIONAL	PERFORMANCE	IMPROVEMENTS	– OVERVIEW	

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 64 of 97
Operational improvements will drive projected annual savings(1)

64

PREPA management is in the process of identifying and implementing additional savings and efficiencies

1) New management is in the process of validating the annual projected savings identified by its prior restructuring advisor

OPERATIONAL	PERFORMANCE	IMPROVEMENTS	– OVERVIEW	

Activity Rationale Initial 

Investment

Annual 

Savings

Utility of the future – smart grid (IOT)

Increased productivity, lower time 

to restore service, efficient 

management of demand, better theft 

management

TBD TBD

Reduction in technical regions from 7 

to 5

Optimize number of customers 

considering topography and 

revenues configuring for future end 

state

TBD TBD

Business processes reengineering Capitalize on lower cost and 

efficiency; better service TBD TBD

Mobile work force management

Reduce maintenance backlog; 

improve technical productivity, 

standardize workflow access 

districts

$3.75m $9m

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 65 of 97
§ Headcount has been reduced by 30%, or 2,584 employees 

since 2012

§ However, there still exists room for operational savings as 

highlighted by the actionable $729m total annual expenses 

across labor, O&M and bad debt

§ Business process reengineering will help PREPA achieve 

savings in non-productional areas; such as administration and 

customer service

Approximately 28% of PREPA’s total operating expenses are actionable

PREPA’s operating expense profile and recent attrition constrains savings 

opportunities 

Total Headcount by Year

8,626 

8,465 

7,822 

6,975 

6,563 

6,042 

 5,000

 6,000

 7,000

 8,000

 9,000

2012 2013 2014 2015 2016 2017

Headcount

Year

OPERATIONAL	PERFORMANCE	IMPROVEMENTS	– OVERVIEW	

65

72%

18%

8%

3%

Fuel	&	Purchased	Power

Total	Labor	Expense

O	&	M	Expenses	(ex.	Labor)

Bad	Debt	Expense

10 Year Average

Annual Expense $ (in millions) %

Fuel & Purchased Power 1,854 71.7

Total Labor Expense 450 17.9

O&M Expenses (ex. Labor) 214 8.3

Bad Debt Expense 65 2.5

Total Operating Expense 2,583 100.0

Source: Headcount and other figures provided by PREPA Human Resources Department

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 66 of 97
X. Governance

66

Confidential - Subject to Further Revisions and Modifications

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Exhibit 20 Page 67 of 97
Management mission statement

GOVERNANCE	– MISSION	STATEMENT

67

Management is committed to executing the transformation of PREPA into a utility of the future, enabled by a rigorous 

corporate governance framework including a PMO implementation structure with ambitious and measurable 

transformational objectives

Regional transmission and distribution 

companies with full accountability and 

enclosed by technology platform 

(smartgrid) 

Puerto Rico’s generation needs 

provided via public-private 

partnerships and renewable energy

Infrastructure investments that lead to 

full compliance with environmental law 

(e.g. MATS)

Leverage innovative technology to 

drive efficiencies and improve 

customer service

Preserve Board of Directors 

independence and professionalism and 

implement KPI program

Rate Design that adequately distributes 

costs based on cost of service

Business process reengineering

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 68 of 97
Governance & Accountability

68

§ Cultural change to drive increased 

transparency and accountability

§ In consultation with its external advisors, 

PREPA has developed KPI’s to ensure 

measurement of meaningful performance 

metrics to reinforce accountability across 

the organization 

§ Further modifications to the KPI program 

will be made as initiatives included in the 

Fiscal Plan are finalized

Aug-16 Sep-16 Oct-16

Overall

Safety - recordables (% incidents per 100 employees) (%) 13.1 12.8 14.4 11.0 3.45

Abseentism (%) (%) 14.0% 23.0% 0.0% 2.0% -2.0%

CAIDI (Min) (Min) 185.3 179.4 206.1 146.0 60.1

Operational Expenses vs. Budget (excluding fuel) (%) (%) 105.1% 105.4% 0.0% 2.5% -2.5%

Capital Expenses vs. Budget (%) (%) 33.5% 28.2% 0.0% 7.0% -7.0%

T&D

SAIDI - Average interruption duration (Mins) 79.9 78.4 81.4 48.0 33.42

SAIFI - Average interuption frequency (%) 0.431% 0.437% 0.395% 0.328% 0.067%

Monthly Net Work Order Balance (+, -) -6,314.0 -720.0 0.0 1,500.0 1,500.0

IT

On time project delivery (%) 0.0% 50.0% 75.0% 75.0% 0.0%

System up -time (Zabbix) (%) 99.0% 97.0% 97.4% 98.0% -0.6%

Incident mgmt - problem resolution Days 1.78 1.72 1.56 7.00 5.44

% unresolved tickets after 30 days (%) 5.4% 6.0% 3.8% 20.0% -16.2%

HR

% of jobs with current job description (%) (%) 5.0% 13.5% 0.0% 70.0% -70.0%

Average time to fill vacancies (Days) 17.6 15.7 0.0 45.0 -45.0

Customer Service

Increase Cash Collection

DSO (Days sales outstanding) Gov Customers (ratio) Days 0.0 0.0 0.0 60.0 -60.0

DSO General Customers (ratio) Days 0.0 0.0 0.0 45.0 -45.0

Cash recovered on theft ($millions) ($ mm) $1.9 $2.0 $0.0 $2.0 ($2.0)

NTL reduction as % of net generation (12 month rolling avg) (%) 5.7% 4.9% 0.0% 4.5% -4.5%

Average speed to answer (Hr:Min:Sec) 0:17:44 0:13:20 0:00:00 0:05:00 0:05:00

Wait time in commercial offices (Hr:Min:Sec) 0:18:18 0:16:40 0:00:00 0:15:00 0:15:00

Planning, Environmental

Timeliness of response to regulatory requests (% on time) (%) 100% 100% 100% 95% 5%

Timliness of permit renewals (% on time) (%) 100% 100% 100% 95% 5%

Key Performance Indicator Unit Target Variance Trend Three Month 

Prior KPI

Two Month 

Prior KPI

One Month 

Prior KPI

GOVERNANCE	– OVERVIEW

Source: PREPA Internal Planning Department

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 69 of 97
Proposed PREPA PMO structure

PREPA

Executive Director

69

Implementation

A PMO structure will be set up as a support system to manage execution of critical initiatives

Legal and Regulatory 

Advisory [Reserved]

Restructuring Support & 

Fiscal Affairs

Strategic PMO

Operational 

Transformation Innovation

PMO

Fiscal Plan Initiatives

Working Groups

Fiscal Plan Initiatives

Fiscal Plan Initiatives

Working Groups Working Groups

GOVERNANCE	– ADMINISTRATION

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 70 of 97
XI. Key Risks & Mitigation Strategies

70

Confidential - Subject to Further Revisions and Modifications

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Exhibit 20 Page 71 of 97
Key risks with details on mitigation

KEY	RISKS	– OVERVIEW	

71

Potential Risks Mitigation Strategies

§ Impaired ability to adjust rates as forecasted and 

recover planned and approved costs 

§ Seek and obtain approval for FRM

§ Under-delivery of investment program § Organizational structure with rigorous PMO 

approach and ongoing reporting and KPI’s, as well 

as support from the Puerto Rico Fiscal Agency and 

Financial Advisory Authority and the P3 Authority

§ Under-delivery of OPEX, fuel cost savings § Organizational structure with rigorous PMO 

approach and ongoing reporting and KPI’s

§ Limited ability to renegotiate labor agreements or 

achieve payroll savings 

§ PREPA is still evaluating whether additional 

payroll savings are possible

§ Under-staffing in key operational roles due to 

potential labor shortage, concerns over pensions 

§ Contract specialized labor directly or via 3rd parties

§ Limited ability to access capital markets and 

liquidity 

§ Fiscal Plan assumes PAYGO for T&D maintenance 

and currently uncommitted financing or investment 

for AOGP and execution of public-private 

partnerships for development of new generation

§ Lack of political will to drive changes § Independence component in the Board of Directors

§ PREC as regulator provides a forum fact driven 

rate design, cost recovery and long term capital 

planning and execution

§ Implementation of PMO

§ FOMB oversight

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 72 of 97
PREPA’s transformation, as included within this Fiscal Plan, is still contingent on a number of assumptions, risks and 

uncertainties, some of which are and will be beyond the unilateral control of PREPA including, but not limited to:

§ Implementation of new rate structure program, including collections from governmental and non-governmental customers

§ Successful completion of all Validation Proceedings (see Appendix) related to the securitization authorized by the PREPA 

Revitalization Act (Act 4-2016)

§ Potential for additional deterioration in macroeconomic conditions which may materially impact revenues and collections as a result of 

decreased economic activity, increased migration, and/or affordability constraints

§ Ability to execute capital improvement program via public-private partnership delivery and financing model

§ Ability to fund or obtain financing for the construction of AOGP

§ Inability to obtain financing for the construction of AOGP. Options available to finance AOGP are limited given RSA’s restrictions 

regarding new SPV bond issuances (e.g. clear market period)

§ Divergence from short and long term financial projection assumptions as detailed in the ‘Financial Projections’ section of this plan 

§ Achieving operational results and/or executing operational / capital improvements, given permitting and financial constraints

§ Resolution of environmental issues and achieving MATS compliance

§ Ability to obtain adequate liquidity available to close RSA transaction and implement business plan

§ Achieving budget targets/revenue requirements and targets to fund necessary operating costs

§ Potential for significant additional loss of load than projected in the Fiscal Plan due to potential acceleration in the installation of 

distributed generation, and/or development of co-generation capacity (above the projected 42.6MW assumed in the projections)

§ Consummation of debt restructuring consistent with RSA through Title VI of PROMESA or other mutually agreeable mechanism

Certain key risk factors on remaining transformation

KEY	RISKS	– OVERVIEW

72

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 73 of 97
XII. Appendix

73

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 74 of 97
Generation sites

APPENDIX	– ENERGY	PROJECTS	

74

Cambalache

Capacity (MW) 248

Location Arecibo

Construction Year 2007

Fuel Type Fuel Oil #2

Costa Sur

Capacity (MW) 990

Location Guayanilla

Construction Year 1962-1973

Fuel Type Fuel Oil #6

Eco Eléctrica

Capacity (MW) 540

Location Peñuelas

Construction Year 2000

Fuel Type Fuel LNG

Palo Seco

Capacity (MW) 602

Location Cataño

Construction Year 1960-1970

Fuel Type Fuel Oil #6

San Juan Combined Cycle

Capacity (MW) 440

Location San Juan

Construction Year 2008-2009

Fuel Type Fuel Oil #2

Aguirre Combined Cycle Plant

Capacity (MW) 592

Location Salinas

Construction Year 1977

Fuel Type Fuel Oil #2

AES

Capacity (MW) 454

Location Salinas

Construction Year 1994

Fuel Type Fuel Coal

Aguirre Thermo Electric

Capacity (MW) 900

Location Salina

Construction Year 1975

Fuel Type Fuel Oil #6

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 75 of 97
Energy Sources: How does Puerto Rico compare?

75

§ Puerto Rico fully depends on 

imported petroleum in order to 

satisfy its energy needs

§ The cost of imported petroleum 

has driven Puerto Rican power 

prices to more than twice the 

average power price in the states

0% 10% 20% 30% 40% 50%

Coal

Nuclear

Renewables

Natural Gas

Petroleum

Puerto Rico United States Germany

APPENDIX	– ENERGY	PROJECTS	

Source: P3 Summit Puerto Rico. “Energy Projects”

Energy Source Mix

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 76 of 97
Restructuring Support Agreement (“RSA”)

76

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 77 of 97
Securitization structure: True up mechanism designed to adjust quarterly to 

cover debt service by operation of law (Act 4 – 2016)

PREPA

Retail Electric 

Customers

Depository Agent:

Central Collection 

Account

Utility Bill 

Payments

Operating 

Account

SPV Indenture 

Trustee

Base Collections Transition Charge Collections

Payments split pro rata in the case of 

partial payments

Other Securitization 

Investors

Principal & Interest Remittance

Calculation Agent

Calculate Transition 

Charge & Confirm Inputs

Collections

§ Customer collections will be remitted daily to a 

Central Collection Account (“CCA”) managed by 

the Depository Agent

§ On a daily basis, funds in the CCA will be split 

between PREPA and the SPV Indenture Trustee

§ PREPA will work with the Calculation Agent to 

update its remittance assumptions regularly based 

on changes in billing and collection performance

Collection Accounts at 

Point of Payment 

(Regional Offices, 

ACH Processing, etc.)

Daily Remittance of 

Collections

Daily Split

Review Allocation 

Methodology

Utility Bill for All Amounts Owed

Mirror Bond 

Escrow Agent

PREPA Legacy Bond 

Indenture Trustee

Insured PREPA 

Legacy Bondholders

Principal & Interest Remittance

77

APPENDIX	– SECURITIZATION

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 78 of 97
§ Mirror Bonds are securitization bonds that provide credit support for the Insured PREPA Legacy Bonds, enabling the Insured PREPA Legacy 

Bonds to receive the benefits of the securitization structure

• Mirror Bonds would have the same economic terms (i.e., principal, interest and maturity date(1)) as the Insured PREPA Legacy Bonds, 

but would not be insured

• Mirror bonds would be held by an escrow agent and would not be tradeable instruments; in contrast, Insured PREPA Legacy Bonds

would remain insured and tradable

• Exit consents will modify the Legacy Bonds to remove obligations from PREPA that could interfere with operations or 

otherwise negatively impact PREPA (ex. asset sales, privatization)

• Transition Charge and the automatic quarterly adjustment mechanism would provide cash for payment of debt service on the Mirror 

Bonds (and ultimately the Insured PREPA Legacy Bonds, thereby discharging, dollar-for-dollar, PREPA’s payment obligation on the 

corresponding Insured PREPA Legacy Bonds)

Monolines will retain legacy bonds while obtaining securitization mirror bonds

PREPA

Customers

Insured Bondholders

Current Structure

§ Customers pay fixed and pass 

through rates to PREPA to cover 

costs, including debt service

§ As part of its collections, each 

month, PREPA collects 1/6 of 

next interest and 1/12 of next 

principal payment from 

customers

§ Bondholders receive principal 

& interest payments from 

PREPA

Depository Agent

Customers

Insured Bondholders

Mirror Bond Structure

§ Customers pay Transition Charge in amounts sufficient to 

pay debt service on securitization bonds, including Mirror 

Bonds

§ PREPA, in its capacity as servicer and on behalf of the 

SPV, collects Transition Charges from customers each 

month and delivers the funds to the SPV Bond Trustee 

§ Holders of Insured PREPA Legacy Bonds receive principal 

& interest payments

Mirror Bond Escrow 

Agent

§ Mirror Bond Escrow Agent sends Mirror Bond debt 

service to PREPA Legacy Bond Indenture Trustee for 

payment of Insured PREPA Legacy Bonds

SPV Bond Trustee § The SPV Bond Trustee pays, semi-annually, Mirror Bond 

debt service to the Mirror Bond Escrow Agent

1) Under current RSA, scheduled maturity date with respect to a Mirror Bond would be same as maturity date on the corresponding Insured PREPA Legacy Bond; 

but, the final (contractual) maturity date of a Mirror Bond will be up to 2 years later to permit any delay in receipt of Transition Charges to be made up without 

resulting in a default on said Mirror Bond

78

APPENDIX	– SECURITIZATION

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 79 of 97
The debt service schedule below presents all interest expense and principal payments for the power revenue bonds (SPV Debt 

Service) and bank debt (PREPA Debt Service) included in the fiscal plan. This excludes any AOGP funding

PREPA and SPV debt service schedules

79

Notes:

1) Excludes AOGP debt service

2) CCAB accretion refers to accrued interest on capital appreciation bonds

3) Q3 calendar year 2017 closing date

APPENDIX	– DEBT	SERVICE

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026

PREPA debt service

Principal $85.5 $11.8 $11.8 $11.8 $11.8 $11.8 $59.0 $59.0 $59.0 –

Interest 369.5 12.6 14.0 13.4 12.8 12.2 10.6 7.5 4.4 2.5

Total $455.0 $24.4 $25.8 $25.2 $24.6 $24.0 $69.6 $66.5 $63.4 $2.5

SPV debt service (assuming refinancing)

Principal $11.9 $75.1 $65.7 $78.0 $97.7 $50.2 $69.8 $69.4 $111.0

Interest 319.0 364.5 363.2 361.4 358.7 365.9 412.9 408.7 405.7

Surety fees & replacement 16.0 12.7 12.9 12.6 11.9 5.5 28.9 39.7 42.1

Total – $346.9 $452.3 $441.7 $452.0 $468.3 $421.6 $511.7 $517.8 $558.7

Memo:

Debt service assuming no access to capital markets – $346.9 $452.3 $441.7 $452.0 $468.3 $697.6 $759.1 $770.2 $814.8

Benefit from access to capital markets – – – – – – 276.0 247.5 252.4 256.0

CCAB accretion – 52.8 66.5 70.2 74.1 78.3 – – – –

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 80 of 97
Key Risk Factors on Remaining Transformation

80

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 81 of 97
Certain key risk factors on remaining transformation

81

APPENDIX	– KEY	RISKS

§ To obtain the legal rulings required for bond counsel’s opinion for the issuance of securitization bonds, the Revitalization 

Act established a “validation process” for parties to challenge the Revitalization Act and the SPV Bond Resolution (the 

“Validation Proceedings”)

§ Seven lawsuits were filed before seven separate judges at Court of First Instance in San Juan; Two lawsuits remaining (One 

Phase One Challenge, UTIER, and one consolidated Phase 2 Challenge)

§ Issues raised in the Validation Proceedings need to be resolved favorably in order to consummate the RSA transaction, 

though the risk of delay has been mitigated by the favorable UTIER decision and other case dismissals

§ Given these recent developments, PREPA is no longer seeking the FOMB’s intervention in the Validation Proceedings, 

which was previously suggested as a vehicle to consolidate and expedite the pace of the Validation Proceedings

Revitalization Act Challenges Bond Resolution Challenges

§ UTIER. A favorable decision regarding the validity of the 

Revitalization Act and the Restructuring Order is currently 

under appeal at the Puerto Rico Supreme Court; has been 

briefed and is pending before Supreme Court for a ruling; 

UTIER filed a motion seeking further briefing, which 

PREPA opposed

§ Jubilados I. Dismissed by the plaintiffs with prejudice

§ Jubilados II. Dismissed with prejudice

§ Cuadrado. Dismissed without prejudice

§ All three Phase Two Challenges were consolidated into the 

PV Properties case; administrative law standard of review 

determined to apply

§ Petitioner briefs due by April 21, and PREPA, SPV and 

PREC response due May 12

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 82 of 97
Certain key risk factors on remaining transformation 

82

Revitalization Act Challenges Restructuring Bond Challenges

§ Validity. Validity of Revitalization Act

§ No Impairment. No provision of the Act breaches or 

impairs any contract or constitutes a taking

§ Revenue Attribution. Transition Charges are revenues and 

income solely of the SPV and are not revenues or 

resources of PREPA, the Government of Puerto Rico or 

any other Person 

§ Not a Tax. Transition Charges are not a tax and the SPV’s 

right to collect them is irrevocable

§ No Encumbrance. Transition Charges are not subject to 

any other lien or levy

§ Constitutional Matters. Any matters relating to the 

foregoing, under Puerto Rico or US constitution

§ Validity. Validity of: (i) Energy Commission’s 

Restructuring Order; (ii) issuance of Restructuring Bonds 

by the Corporation; (iii) PREPA’s outstanding debt 

(iv) SPV’s property rights with respect to the Transition 

Charges; and (v) Transition Charge formulae

§ Applicability. Validity and applicability of: (i) Transition 

Charges; (ii) Adjustment Mechanism; and (iii) revocability 

of right of the Corporation to impose and collect 

Transition Charges

§ No Breach or Taking. Neither the issuance of the 

Restructuring Bonds nor the amount of the Transition 

Charge results in: (i) the breach of any contract or 

agreement between the Government of Puerto Rico or 

PREPA and its creditors; (ii) any fraudulent conveyance; 

or (ii) any taking of property without just compensation

§ Constitutional Matters. Any or all other matters relating to 

the foregoing, under Puerto Rico or US constitution

To date, plaintiffs have filed complaints including all of the above allegations, except for challenges regarding (i) validity of 

PREPA’s legacy bonds, and (ii) fraudulent conveyance issues

APPENDIX	– KEY	RISKS

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 83 of 97
Operational Savings

83

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 84 of 97
Operational improvements – Fuel & generation

Situation Encountered Actions Taken

Forecasting and 

Inventory 

Controls

§ Limited information sharing led to unnecessary build-up of 

fuel inventory

§ Fuel Inventory controls not in line with industry standards

§ Implementation of fuel forecast tool and closer coordination 

have reduced inventory levels by ~$36m and generated 

ongoing annual savings of $3-4m

§ Implemented industry standard fuel inventory controls

Generation 

Dispatch

§ Limited coordination prevented PREPA from capitalizing on 

opportunities to optimize dispatch

§ Roll-out of revised S&OP process is generating annual 

dispatch savings of ~$23m

Fuel Sourcing & 

Supply Chain

§ PREPA’s fuel procurement processes did not provide 

sufficient opportunity to secure best terms

§ Competitive RFP processes have generated annual reduction 

in fuel oil adders of ~$31m and a one time $65m cash flow 

saving

§ Renegotiation of natural gas contract for Costa Sur have 

generated annual fuel savings of ~$33m

Spinning Reserve

§ Spinning reserve levels maintained at higher than required 

levels

§ High frequency and duration of forced outage events

§ Implementing action plans and business case to reduce the 

number and severity of forced outages will result in an 

estimated saving of ~$29m

§ With the stabilization generation units, optimize the spinning 

reserves to deliver fuel savings estimated at ~$25m

Fuel related improvements have generated annual run-rate savings of ~$144m as well as one time liquidity improvements of 

~$101m to date

84

APPENDIX	– OPERATIONAL	IMPROVEMENTS

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 85 of 97
Operational improvements – Customer service

Customer service improvements have generated annual run rate savings of ~$77m as well as one-time liquidity improvements of ~$135m to date

Situation Encountered Actions Taken

Government 

Collections

§ Ineffective collections practices and acceptance of non-payment 

resulting in Gov. past dues in excess of $255m

§ Deficient billing practices and customer communication leading 

to high balances in dispute spanning multiple years 

§ Implemented rigorous collections program with Public 

Corporations and Agencies, using service suspensions to drive 

collections and sign payment plans

§ Collected 120% of amounts invoiced to Gov. customers over the 

last 12 months, Past due balances have improved by $70m

General Customer 

Collections 

§ Delays in execution of service suspensions with residential and 

wholesale customers

§ Deficient billing practices leading to high number of estimated 

(and disputed) invoices

§ Accumulation of Act 33-driven balances

§ No collections effort on severely past due accounts

§ Streamlined and enforced service suspension program, rolled-out 

performance KPI’s, organized Act 33 work, special programs (i.e. 

residential housing, Top-20 by Region), increasing cash 

collections by ~$65m

§ Engaged 3rd party collections firm to focus on severely past due 

accounts. $3.5m net collected

§ Developing new processes for centralized collections, deposit and 

bond management, Act 57 objections 

Theft / NonTechnical loss

§ Pervasive culture of accepting higher than industry standard 

non-technical loss rates

§ Disorganized theft reduction effort and lack of meaningful 

deterrents leading to low probability reducing theft rates

§ Deficient meter maintenance practices, increasing numbers of 

meters with reading issues (end-of -life)

§ Reorganization of ICEE, new leader engaged, streamlined 

administrative process, implemented and rolled-out new Theft 

Analytics system and training 

§ $60m annual reduction in non-technical loss

§ Meter renovation and verification projects launched for secondary 

and primary customers (smart meters, meter recycling, meter 

equipment field verification)

Customer 

Experience

§ Long wait times in the Call Center, in excess of 20 min.

§ Long lead time to address customer service issues, 8+ weeks on 

average

§ Long wait times in commercial offices above 30 min.

§ Customers visiting offices for routine transactions that can be 

done electronically (payments)

§ Improved training and use of 3rd party call center

§ Reduced backlog of open orders by 40% through combination of 

office and field work

§ Centralizing all billing back-office functions to focus commercial 

offices on customer care

§ Launching program to increase use of electronic transactions

85

APPENDIX	– OPERATIONAL	IMPROVEMENTS

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 86 of 97
Operational improvements – Indirect procurement

Addressing inadequate processes has generated annual savings of ~$23m as well as one-time improvements of ~$32m to date

Situation Encountered Actions Taken

Procurement

§ Overly complex procurement processes and lack of 

specialized expertise leading to lead times of 3-5 months

§ Limited use of contracts is preventing PREPA from 

leveraging scale with suppliers

§ Legislate change allows PREPA to use RFPs to reduce prices 

and obtain optimal terms

§ Organizational structure changes improved efficiency and 

enabled strategic planning

§ Launched EDE/MRO RFP which will lead to significant 

procurement cost savings in FY2017

Inventory

§ Lack of coordination and a culture of ‘more is better’ have 

led to ~$70m of obsolete inventory and another $50-100m of 

off-book inventory

§ Restructured inventory management and control process, 

trained personnel, developed and tracked KPIs resulting in 

savings of $32m to date (additional ~$15m expected in 

FY2017)

Fleet

§ Large and under utilized fleet with 3,500 vehicles/equipment

§ Underinvestment in fleet and maintenance has created an 

unsafe fleet

§ Have implemented a fleet rejuvenation program with the goal 

of eliminating 1,000 vehicles/equipment

§ In the process of negotiating contract terms with a fleet 

maintenance outsourcing provider. Implementation expected 

in early FY2017

Real estate § No cohesive real estate strategy in place to manage large 

portfolio in excess of 1,000 properties

§ Conducted RFP to hire 3rd party professional real estate firm 

to develop strategy and dispose of excess properties

86

APPENDIX	– OPERATIONAL	IMPROVEMENTS

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 87 of 97
Operational improvements – Employee related

Situation Encountered Actions Taken

Productivity

§ Inflexible work rules and high absenteeism

§ Paid leave of 80 days (twice industry norm)

§ Act 66 has generated improvements of $40m, but 

strong resistance is limiting its full potential

§ PREPA is implementing changes to work rules and benefits required to 

improve costs and productivity:

• Changes to work shifts in Call Center, along with use of 3rd 

party services

• Changes to “cartas de deberes” for ICEE field investigators 

(energy theft)

• Centralization of account maintenance activities (moving 

employee locations)

Safety

§ Unacceptable safety record, in excess of 14,000 

accidents and 15 fatalities over 10-year period

§ Culture of focusing on legislative compliance 

instead of promoting active safety culture

§ Hired industry leading firm to assess current situation and develop 

program to improve

§ Development of standard HSE dashboard to track implementation of 

improvement program

Medical 

Benefits

§ Medical benefits costs set to increase for both active 

and retired employees

§ PREPA’s medical benefits design way above 

comparable Public Corporations

§ Retirement system projected to be insolvent by 

2024

§ Transitioned to new supplier (MMM) for Retired Employees Health Plan 

for $4m annual savings. MMM is exceeding service level expectations 

after 12 months

§ Concluded FY 2013-2014 audit of active employees health plan for 

~$3m cash reimbursement

§ Implemented changes to Active Employees Health Plan for $6m annual 

savings and improved utilization controls. Introduced service level 

metrics and performance reporting

§ No significant union issues relative to the Health Benefits changes

§ On-going analysis of Pension Plan options

87

APPENDIX	– OPERATIONAL	IMPROVEMENTS

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 88 of 97
Operational improvements – organization Related

Situation Encountered Actions Taken

Succession 

Planning

§ No succession plans

§ Over 1000 currently staff eligible for retirement; many in 

critical positions

§ 350 retirements per year; 1000 in 2014 associated with 

changes to the retirement plan

§ Retirement system vulnerable and retirement levels 

sensitive to any changes

§ Identified most critical retention risks in T&D, Generation and 

CS (covers approx 80% of the workforce)

§ Developed risk reduction plan via identified successors for 

50% of the critical roles and alternative strategies for 40% of 

the critical roles (these are yet to be implemented)

KPI - Meritocracy 

& Performance 

Mgmt

§ Large Confianza job class drives significant instability, 

low accountability and lack of leadership from top 

management

§ Leaders and managers are placed in positions based on 

political affiliation vs. job qualifications

§ Outdated job descriptions and limited use of performance 

KPI’s

§ No formal performance management process

§ Identified KPIs (PREPA-wide and individual Directorates)

§ Commenced KPI data gathering and built report template 

§ Piloted performance management with Senior Staff Defined 

PREPA-wide competencies and collected senior staff selfevaluations 

§ Built online performance evaluation tool to capture evaluations 

and support a broader roll-out (scope includes competency 

evaluations only at this stage)

Organization

Blueprint

§ Highly silo’d, highly traditional bureaucracy

§ Overly staffed with non-value added administrative 

personnel

§ Over sized executive directorate and executive team 

§ Shortages in a limited number of specific technical skill 

areas

§ Defined key organizational/operational roles; Redesigned 

current directorate structure 

§ Establish staffing levels to support operational priorities

§ Design new/streamlined governance and decision processes

88

APPENDIX	– OPERATIONAL	IMPROVEMENTS

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 89 of 97
Operational improvements – Information technology

Situation Encountered Actions Taken

Information 

Security

§ Lack of adequate protections for PREPA’s mission 

critical data network

§ PREPA’s customer data (personal identifiable data, 

i.e. SSN, credit card numbers) not safe

§ Lack of IT security basic policies, processes and 

specialist resources 

§ Implemented critical network protection components: firewall, proxy servers, 

network monitoring

§ Developed plan to address every instance where customer data are not hidden, 

encrypted or protected

§ Implemented strong password policy across entire company and started 

training program

§ Currently conducting penetration test with specialist firm to define IT Security 

Phase II action plan

Technical 

Infrastructure 

§ Santurce main data center at high risk of outages, 

due to deterioration of physical facilities and 

environmentals (HVAC, power supply, cabling)

§ Non-operational disaster recovery plan

§ Lack of effective monitoring of infrastructure 

problems and service levels

§ Implementing plan to migrate critical applications to a co-location facility 

(PREPA.Net) and 3rd party cloud (Microsoft)

§ Cloud migration already 70% complete. Target to migrate applications to 

PREPA.Net by end of Q4 2017

§ Disaster Recovery site in Aguirre is operational

§ Implemented new Network Operations Center, monitoring software and IT 

help desk

Customer Care 

& Billing 

System

§ Lack of adequate testing and software release 

process , resulting in poor software quality 

§ Deficient reporting environment, data unreliable, 

reports take long time to produce

§ Functional gaps, leading to manual processes (i.e. 

field operations)

§ Application running an obsolete version, has not 

been updated since implementation in 2013

§ Application outages and slow response time to 

users, exacerbated at month end 

§ Implemented new provisional rate in 30 days from notification date to live 

release, worth $18m in additional cash. Currently implementing permanent 

rate

§ Implemented new documentation standards for design, configuration of 

software changes

§ Completing implementation of new testing environment (hardware and 

software), process and testing tool

§ Implemented automated KPI reporting dashboard, updated weekly, using 

existing tools

§ Developed software upgrade plan, to be executed after rate implementation 

89

APPENDIX	– OPERATIONAL	IMPROVEMENTS

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 90 of 97
Energy Infrastructure/P3

90

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 91 of 97
Revitalization Act and upcoming RFPs

§ PREPA Revitalization Act authorizes PREPA to create and foster investment in public-private partnerships 

(P3) related to needs of generation, transmission and distribution of energy

§ P3 Law available to pursue P3 projects; evaluating committee to be composed of 5 members, including 2 PREPA 

representatives, and representatives from GDB, Public Energy Policy Office, and PPP Authority

§ In the event PREPA does not complete competitive processes by dates established in Energy RELIEF Action Plan 

or IRP, the Energy Commission may begin and carry out these competitive processes

§ PREPA and the Energy Commission developed a joint regulation for an RFP process, that was approved by the 

Governor during September of 2016 

§ PREPA will determine its new generation modernization priorities, taking into account operational performance 

of existing units, IRP outcome, market appetite (referencing REOI and other proposals received) and planned 

renewable additions as well as other relevant considerations.

§ As part of its Modified Integrated Resource Plan, PREPA is expanding its use of renewable energy and is 

scheduled to begin a competitive bidding process for a public-private partnership for new generation capacity 

in the north of the island by June 2017

91

APPENDIX	– ENERGY	INFRASTRUCTURE/P3

Confidential - Subject to Further Revisions and Modifications

Case:17-03283-LTS Doc#:4014-16 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 20 Page 92 of 97
Energy infrastructure/P3 – critical projects

§ Project sequencing will be designed to effectively progress the advancement of all needed energy Critical Projects and avoid major obstacles in 

the shortest timeline possible

§ Will promote and improve funding models to leverage the use of private funds, where/as relevant and maximize access to, or use of, unused 

federal funds available

§ PREPA is in dire need of an ambitious Infrastructure / P3 program for generation and T&D assets by the end of 2019, as well as other critical 

infrastructure projects beyond 2019 

§ Attracting external capital in PREPA’s current fiscal situation must address investors concerns regarding governance, financing and execution 

of proposed infrastructure/Fiscal Plan program:

§ PREPA will incorporate global best practices and industry standards in:

• Governance: political independence, trusted board, and professional management of P3 delivery entity; and

• Financing and execution: market terms on exclusivity and re-negotiation provisions of commercial agreement, subordination of any 

government-provided capital, clarity on ultimate counter-party and credit enhancement support

§ A comprehensive and self-reinforcing P3 program will be designed to include:

APPENDIX	– ENERGY	INFRASTRUCTURE

92

ü Seeding and ring-fencing a 

P3 delivery entity with 

unencumbered assets and 

potential revenue flows 

ü Leveraging asset base to enhance 

counter-party surety, improve 

project financing terms, and 

potentially raise third party 

financing for the P3 program or 

delivery entity 

ü Establishing an independently-governed (or specifically dedicated 

PREPA PMO office), professionally managed P3 structure (e.g., 

via the P.R. P3 Authority) to select the right projects using 

objective criteria, deliver using optimal procurement strategy and 

commercial terms 

PREPA’s structure should be responsible for end-to-end delivery of P3 projects, protection of core energy infrastructure 

assets, and re-investment into well-defined critical energy infrastructure needs

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Implementation: comprehensive P3 program design, delivery resources & approach to attract 

capital – in tandem with support from the P3 Authority and applicable regulators

APPENDIX	– IMPLEMENTATION

Create the 

Project 

Concept

Prepare the P3 

Project For 

Tender

Tender & 

Deliver the P3 

Project

Description Current State & Need

§ Develop energy project concepts alongside 

public and private partners

§ Establish priorities, timelines and align key 

policy objectives (e.g., environmental and 

health compliance)

§ Build basic profile of various critical projects

§ Attract private investors to provide debt and 

equity providers for construction and 

permanent financing

§ Ensure the financing terms and 

commensurate service levels meet PREPA 

requirements

§ Concerns regarding PREC role in 

infrastructure procurement 

§ PREPA will lead effort under certified 

fiscal plan and budget – and FOMB

§ Gain support of Governor’s 

Infrastructure Taskforce/P3 Authority

§ PREPA implemented market sounding 

effort (REOI in 2016) 

§ There are numerous interested private 

sector parties for energy infrastructure 

projects

§ Expedited permitting under Title V, Act 

76-2000, are key

§ PREPA will design a comprehensive P3 

energy infrastructure program

§ Government procurement process 

viewed as inefficient and uncertain

§ PREPA has limited capital budget to 

provide cash equity 

§ Government, PREPA going through 

restructuring – attracting long-term debt 

remains a challenge

§ Prepare cost estimates and project feasibility

§ Design P3 procurement model 

§ Issue P3 RFPs 

§ Facilitate legal due diligence to identify 

potential risks or legislative requirements

93

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PREPA’s infrastructure program success will hinge on addressing 

fundamental governance, execution, and financing questions

APPENDIX	– INFRASTRUCTURE

§ PREPA will create a PMO for centralized project consideration, including efforts between Taskforce

and P3 Authority & coordination with relevant agencies

§ PREPA is enhancing governance provisions under the supplement to the RSA

Execution & 

Financing

Governance

§ PREPA’s Fiscal Plan contemplates ensuring necessary capital to launch infrastructure/P3 critical

projects as necessary operating expenses to ensure environmental, health and safety compliance,

among others

§ PREPA, through its Fiscal Plan, will ensure having sufficient internal and external resources to

execute

§ Environmental review, siting, permitting (including federal) for critical energy projects will be

managed via Title V (Revitalization Coordinator), Act 76-2000, Executive Order No. 3-2017 and

related regulations

§ Supplemental RSA terms and conditions will be leveraged

§ PREPA is reviewing how to best leverage existing assets to maximize P3 critical project

opportunities

§ Will there be regulation/ legislation that will protect private capital? (e.g. exclusivity, limited

protection from competition)

94

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Governance enablers for P3 program success include political independence, trusted 

board, and professional management of P3 delivery entity & implementation

APPENDIX	– GOVERNANCE	ENABLERS

Trusted Board of 

Directors

Professional 

Management -

Implementation

§ High-level representation across key public sector 

stakeholders and functional areas of expertise 

drawn from prominent private and public sector 

individuals – to provide credibility and assure 

broad buy-in to overall energy P3 projects 

§ Sufficient coverage from in-house PREPA 

professionals and external experts across key 

functional areas (technical, commercial, legal, etc.) 

will be organized to assure appropriate diligence, 

procurement approach, commercial structure and 

implementation for each critical project

Success factor Rationale

§ PREPA BoD will remain professional 

and highly supportive of the certified 

Fiscal Plan 

§ PREPA is designing, as part of its new 

organizational structure, PMO offices to 

manage and implement operational, 

financial and infrastructure projects 

under the Fiscal Plan

Key implementation concerns 

addressed

Political 

Independence

§ Political independence of decisions to determine 

optimal delivery and procurement models, to assure 

long-term investors and developers that:

• Critical projects have merit and address 

clear needs – under PREPA certified fiscal 

plan

• Procurement is to be completed without 

political veto or interference per fiscal plan

§ Priority critical projects are identified as 

is criteria to support projects

§ Permitting form local agencies as well 

as federal must be efficient and 

supportive – under PROMESA 

95

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Legislation has been enacted to address the challenges faced by Puerto Rico’s 

energy sector

APPENDIX	– NEW	LAWS

96

Legislation

Puerto Rico Energy 

Transformation and RELIEF 

Act (Act No. 57-2014) 

§ Creation of Energy Commission 

• Regulatory oversight for PREPA, including assessment of service quality and 

review of proposed rates

• Ongoing rate case with respect to proposed 1.025 cent/kWh provisional rate 

increase 

• New transparent rate structure

• Provides for better monitoring of PREPA’s efficiency

• Covers PREPA’s costs and eliminates structural deficits

PREPA Revitalization Act

§ Enhanced Accountability 

• Consumer Advocacy position: the Independent Consumer Protection Office 

(ICPO) 

• Limits on electricity provided to municipal entities as Contributions in Lieu of 

Taxes (CILT)

The Puerto Rico Oversight, 

Management and Economic 

Stability Act (PROMESA)

§ Creates a federal restructuring regime for the Government of Puerto Rico and its 

instrumentalities

§ Establishes the FOMB to oversee the development of budgets and fiscal plans for 

Puerto Rico’s instrumentalities and government

Confidential - Subject to Further Revisions and Modifications

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