32
Puerto Rico Electric Power Authority Company Overview and Project Development Eng. Miguel A. Cordero Executive Director February 26, 2010
Puerto Rico Electric
Power Authority
Company Overview and Project
Development
Eng. Miguel A. Cordero
Executive Director
February 26, 2010
Disclaimer
Today’s presentation includes certain statements that are not historical in nature
but reflect forecasts and “forward-looking statements,” for example, statements
regarding anticipated future financial and operating performance and results,
including estimates for growth. Actual results may differ materially from those
expressed or implied by such forward-looking statements. These statements are
based on the Puerto Rico Electric Power Authority’s current beliefs regarding
future events, and are based upon a number of estimates and assumptions that
are subject to significant uncertainties, many of which are outside the control of
the Puerto Rico Electric Power Authority, Government Development Bank for
Puerto Rico, the Government of Puerto Rico and its agencies and
instrumentalities.
This presentation is not an Official Statement and does not constitute an offer to
sell or to purchase bonds, nor a solicitation of an offer to sell or to purchase
bonds in the Commonwealth of Puerto Rico, the United States, or in any
jurisdiction where such offer, solicitation or sale may be unlawful. This
presentation has been prepared solely for informational purposes, and should
not be construed as a recommendation to buy or sell any security or to
participate in any particular trading.
1 Overview
2 Financial Performance
3 Reconstruction Initiatives
4 Diversification Strategy
Agenda
PREPA
• PREPA is a public corporation of the
Government of Puerto Rico, and is
empowered to:
– Make contracts
– Acquire properties
– Borrow money, and
– Issue bonds
• The Puerto Rico Electric Power Authority, or PREPA, is a modern public
utility offering a full range of services: we…
– Produce
– Transmit
– Distribute, and
– Sell electricity
• Is also responsible for the establishment of an appropriate rate
structure for its services
History
• PREPA is the first public corporation established in Puerto Rico
• Created by Law 83, on May 2, 1941
• Over 60 years providing electric energy to the island
• PREPA has totally electrified the island of Puerto Rico
Characteristics of Our
Electric System
• PREPA’s system is isolated
• Not possible to purchase energy from
neighboring utilities
• Must maintain greater generating capacity
to guard against contingencies, and to
ensure service reliability
Characteristics of Our
Electric System
• Generating Capacity is 5,264 MW, of which,
507 MW Natural Gas Fired –EcoEléctrica
454 MW Coal Fired – AES
• Long term purchase agreement with
Cogenerators
• Output is fully integrated into the system
Puerto Rico Shines
Mission
To provide electric services to
our clients in the most efficient,
economical and reliable way,
without harming the
environment
Vision
To be competitive with
electric utilities at a
world-class level
1 Overview
2 Financial Performance
3 Reconstruction Initiatives
4 Diversification Strategy
Agenda
Who is PREPA?
Total Assets: $8.8 billion
Total Revenues: $4.0 billion
Electric System:
Generating Capacity:
Peak Demand (in 8/09):
Transmission and Distribution:
Transmission Lines:
Distribution Lines:
38 kV substations:
115 kV substations:
0
0.5
1
1.5
2
PREPA
LADW
P
LIPA
SRP
CPS
SMUD
JEA
Mem
phis
Aust
in
Seattl
e CLM
illio
n C
usto
mers
Public Power Issuers by # of Customers
0
10
20
30
40
50
NYP
ASR
P
Sante
e Cpr.
LADW
PCPS
PREPA
NPP
D
LIPA
JEA
LCRA
Millio
n m
Wh
0
1
2
3
4
5
PREPA
LIPA
SRP
LADW
P
NYPA
CPS
San
tee
Cpr.
JEA
SM
UD
Mem
phi
s
Billio
n D
olla
rs
Public Power Issuers by Sales
Public Power Issuers by Revenues
5,839 MW
3,404 MW
2,419 miles
31,156 miles
283
51
PREPA is one of the largest public power agencies
Source: American Public Power Association. 2009-10
Annual Directory & Statistical Report
Stable Revenue and Customer Base
PREPA is a monopoly selling an essential service.
Large and Growing Customer Base
Client Name Location % of Total SalesPR Cement Ponce 0.57
Amgen Manufacturing Juncos 0.55
Ayerst Wyeth Guayama 0.52
Lilly del Caribe Carolina 0.48
Wyeth Ayerst Lederle Carolina 0.30
San Juan Cement Dorado 0.29
Pfizer Manati 0.28
McNeil Consumers Prod Las Piedras 0.26
Pfizer Vega Baja 0.26
Merck Sharp Dohme Barceloneta 0.24
Bristol Myers Squibb Manati 0.22
1.1
1.2
1.3
1.4
1.5
2002 2003 2004 2005 2006 2007 2008 2009
mil
lio
n c
usto
mers
Residential Commercial Industrial Other
No Customer Concentration Risk
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2002 2003 2004 2005 2006 2007 2008 2009
millio
n d
ollars
Residential Commercial Industrial Government Other
Revenues From Broad Based Economy
More than 1.4 million customers
Balanced mix of residential, commercial,
governmental and industrial customers
No customer concentration risk
Industrial customers, the only customer class that
realistically could self generate or purchase from an
independent power producer, only account for 15% of
revenues
Strong Reserve Margins as Confirmed by
Palo Seco Outage
• Fleet of 31 major generating units in 20 facilities located throughout the island
• Palo Seco outage (602 MW) demonstrated island has adequate reserve margin
– All units operating as of December 2009 (3 out of 4 units were in service by July 2009)
– Substantially all repair costs and incremental replacement power covered by insurance
Reserve margins are adequate in the short to medium term.
0
1,000
2,000
3,000
4,000
5,000
6,000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
YTD
MW
Peak Load Reserve Margin
Reserve Margin ~ 50%
Even with Outage, Stable Availability & Forced Outage
Rates
1 - Figures in parenthesis include Palo Seco availability.
Fiscal
Year
Avg Equivalent Avail.
(with AES and
Ecoelec.)
Equiv. Force Outage
(without AES and
Ecoelec.)
Reserve Margin
(with AES and
Ecoelec.)
2000 78% 9% 56%
2001 80% 8% 53%
2002 80% 7% 49%
2003 81% 9% 59%
2004 82% 9% 53%
2005 85% 6% 49%
2006 87% 4% 46%
20071 84% (89%) 10% (3%) 32% (49%)
20081 80% (88%) 15% (3%) 34% (51%)
20091 76% (82%) 16% (8%) 57% (75%)
Strong Reserve Margins
Palo Seco
Outage
MKWH Sales12 Month Rolling Average
1,500
1,550
1,600
1,650
1,700
1,750
1,800 N
ov-
07
Dec
-07
Jan
-08
Feb
-08
Mar
-08
Ap
r-08
May
-08
Jun
-08
Jul-
08
Au
g-0
8
Sep
-08
Oct
-08
No
v-08
Dec
-08
Jan
-09
Feb
-09
Mar
-09
Ap
r-09
May
-09
Jun
-09
Jul-
09
Au
g-0
9
Sep
-09
Oct
-09
No
v-09
Dec
-09
M-k
wh
Sales
Sales are Up Each Month in (FY 2010)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
July Aug Sept Oct Nov Dec Jan
Increase in Sales, FY 2009 to FY 2010
Operating Expenses
7/2008-
1/2009
7/2009-
1/2010
% Change
Other production 38,658 35,514 -8%
Transmission and distribution 103,685 91,803 -11%
Maintenance 140,035 116,607 -17%
Customer accounting and collection 69,278 63,633 -8%
Administrative & general 138,754 119,289 -14%
Total O&M, excl. fuel & purch.
power
490,410 426,846 -13%
Operating Expense are Down in FY 2010 ($000’s)
Historical and Projected Operating
Results and Coverage
Revenues, Debt Service and Coverage
Historical Projected
1 – Audited2 – After 2010 transactions
Years Ended June 30 2006 2007 2008 20091 2010 2011 2012 2013 2014
Electricity Sales (mwh) 20,620 20,672 19,602 18,516 17,929 17,739 17,667 17,700 17,827
Average Rate (cents/kwh) 17.99 17.76 22.19 21.53 19.90 21.85 23.94 24.86 25.40
Revenues $ 3,732 $ 3,687 $ 4,369 $ 4,007 $ 3,605 $ 3,945 $ 4,299 $ 4,470 $ 4,597
Expenses
Fuel 1,666 1,717 2,303 1,920 1,530 1,804 2,102 2,230 2,362
Purchased Power 603 625 661 672 712 716 735 756 728
Fuel Extra Expense - (114) (96) - - - - - -
Other Current Expenses 765 787 820 786 700 686 684 682 681
Total Expenses 3,034 3,015 3,688 3,378 2,942 3,206 3,521 3,668 3,771
Net Revenues $ 698 $ 672 $ 681 $ 629 $ 663 $ 739 $ 778 $ 802 $ 826
Total Power Rev. Debt Service2 $ 449 $ 455 $ 420 $ 435 $ 471 $ 459 $ 493 $ 538 $ 575
Power Rev. Bond Coverage2 1.55 1.48 1.62 1.45 1.41 1.61 1.58 1.49 1.44
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2006 2007 2008 2009* 2010 2011 2012 2013 2014
Millio
n D
olla
rs
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
De
bt C
ov
era
ge
Revenues Expenses Power Revenue Bond Coverage
1 Overview
2 Financial Performance
3 Reconstruction Initiatives
4 Diversification Strategy
Agenda
Objectives and Strategies
• Reduce energy cost
• Protect the environment
• Reduce operating expenses
• Increase efficiency
• Minimize energy theft
• Develop a proper fuel mix
diversification
• Add renewable energy
• Maximize use of advanced
technology
Energy Objectives for
Puerto Rico
Strategies to Achieve the
Objectives
PREPA Reorganization
• Directorates reduced from 12 to 6
• Secondary supervision positions greatly reduced
• Redundant administrative positions eliminated
• Management units merged
• Personnel reduced or re-trained for other tasks
2008 Organization
2009 Organization
1 2 D I R E C T O R A T E S
6 D I R E C T O R A T E S
Executive
Director
Executive
Director
Vice-Director
Stabilization Plan is Reducing Fixed O&M
300
400
500
600
700
800
1999
2001
2003
2005
2007
2009
2011
2013
mil
lio
n d
oll
ars
(million dollars) Annual Savings
416 Positions $26
Reduced overtime and misc 23
Changes to retiree health plans 46
Total $95
(million dollars) Annual Savings
Attrition (250) 15
Total 15
(million dollars) Annual Savings
Attrition (750 over three years) 46
Total 46
$139 million
net reduction1
Operating Costs (Excluding Fuel & Purchased Power)
Cost Reductions Implemented
FY 2010 Cost Reductions Planned
Future Cost Reductions Planned
14% reduction in non-fuel and purchased power O&M thus far
in FY 2010 compared with similar period in FY 2009
Reductions in each O&M category (see Page 34)
Impact of the Stabilization Plan Year to Date
1 – Difference between FY 2008 actual and FY 2013 projected.
Reducing Theft
• Address theft via
– Increased unannounced door-to-door monitoring
– Automated meter reading
– Geographic information system
– Special meter seals
– Social awareness campaign
– Administrative Judge to settle disputes
• “Smart grid” being implemented
– With smart meters, will be able to show areas
where theft is prevalent
– Will allow remote turn on and shut off
– First smart meter replacements to start in early
2010
The PREPA revenue protection program is designed to increase
revenues and discourage clandestine connections.
82
83
84
85
86
87
88
89
90
91
1983
1986
1989
1992
1995
1998
2001
2004
2007
Eff
icie
nc
y %
(sa
les
/ge
ne
rati
on
)
0
5
10
15
20
25
Av
g R
ate
s (
ce
nts
/kw
h)
Net Efficiency Average Rates
Historical System Performance Efficiency
Initiative expected to generate $50 million
improvement in operating margin
– $16 million improvement budgeted in this year
– $17.6 million billed in CY 2009
Article from the Daily Sun
February 17, 2010
Operating Expenses
50,000,000
55,000,000
60,000,000
65,000,000
70,000,000
75,000,000
80,000,000
85,000,000
90,000,000
95,000,000
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DIC
*Excludes fuel and purchased power
2008
2009
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DIC
2009 1791.9 1629.0 1760.2 1814.3 1898.0 1961.7 2075.0 2098.0 2021.0 2082.8 1906.9 1950.0
2008 1856.8 1758.4 1864.3 1889.7 2028.8 1973.6 1994.8 2108.0 1956.7 2016.7 1849.5 1818.3
0.0
500.0
1000.0
1500.0
2000.0
2500.0
Increased Energy Production
with Reduced Costs
2008
2009*
MW
HX
1,0
00
*7% Increase
1 Overview
2 Financial Performance
3 Reconstruction Initiatives
4 Diversification Strategy
Agenda
Fuel DiversificationGeneration In order to stabilize electric prices, we have developed a fuel diversification plan that
includes the reduction in fuel oil dependency. The use of oil will be cut in half from
2000 to 2015.
2000 2009 20151 Long-Term
Drop in Oil Consumption
Renewables, Hydro
and Others
1%
Oil
99%
Renewables,
Hydro
and Others
1% Renewables,
Hydro
and Others
12%
Oil
48%
Natural
Gas
24%
Coal
16%Renewables,
Hydro
and Others
15%
Oil
26%
Coal
29%
Natural
Gas
30%
0%
20%
40%
60%
80%
100%
2000 2009 2015 Long Term
Oil as a Percentage of FuelNeeds
Oil
69%
Coal
15%
Natural
Gas
15%
1 - Conversions will allow PREPA to burn either LNG or fuel-oil depending on the commodity price.
PREPA’s Generating System
Aguirre Units 1&2Rated: 900 MW
Available: 900 MW
Heat Rate: 10.3, 10.2
In Service: 1975
Costa Sur Units 3,4,5,6Rated: 990 MW
Available: 990 MW
Heat Rate: 11.6, 11.5, 10.7, 10.9
In Service: ’62,’63,’72,’73
Palo Seco Units 1,2,3,4Rated: 602 MW
Available: 386 MW
Heat Rate: 10.9, 11.0, --, 10.4
In Service: ’60,’61,’70
San Juan 7,8,9,10Rated: 400 MW
Available: 300 MW
Heat Rate: 11.2, 11.6, 11.5, 11.6
In Service: ’65,’68,’69
Aguirre CC Units 1&2Rated: 592 MW
Available: 458 MW
Heat Rate: 10.3, 10.2
In Service: 1977
San Juan Units 5,6Rated: 464 MW
Available: 440 MW
Heat Rate: 8.5, 7.9
In Service: 2008
CambalacheRated: 247 MW
Available: 236 MW
Heat Rate: 11.6, 11.7, 11.6, 11.7
In Service: 1997
MayagüezRated: 110 MW
Available: 110 MW
Heat Rate: 10.2, 10.1
In Service: 2008
Guayama (A.E.S)Contracted: 454 MW
Available: 454 MW
Heat Rate: 9.8
In Service: 2002
Peñuelas (EcoElectrica)Contracted: 507 MW
Available: 507 MW
Heat Rate: 7.5
In Service: 2000
Notes: Red Indicates purchased power. Heat rate in thousand Btu/kWh.
Steam Plants (#6 Fired) Coal
Combined Cycle Units (#2 Fired) Combustion Turbines (#2 Fired) Comb.Cycle (NG)
In addition, PREPA has 70 MW of available capacity from 21 hydroelectric units and 9 MW from 7 Diesel Generators
Generation Plans
• Enter into fixed price #2 and
#6 fuel supply contracts
• Enter into contracts for
renewable capacity
• Begin development of Costa
Sur combined cycle and
Aguirre coal fired units
PREPA plan is to reduce fuel cost volatility, increase fuel
diversity and improve generation facility efficiency.
Install infrastructure and begin
operation to permit natural gas use at
major #2-fired facilities
– San Juan and Costa Sur combined
cycle and Cambalache and
Mayaguez gas turbine facilities
Begin construction of Costa Sur
combined cycle and Aguirre coal fired
units
Operation begins at Costa Sur
combined cycle and Aguirre coal fired
units
Near Term (0 to 12 months) Mid-Term (1 to 3 years) Long Term (more than 3 years)
GIS – Gas Insulated Substation
TC - Transmission Centers and
Switchyards
UG Circuit – Underground Circuit
Canóvanas TC $5.3 million
Construction
Ponce TC (230/115 kV) $6.0
million Evaluation
San Juan UG Circuit
$195.8 millionIn operation
Palo Seco GIS$65.7 million In Operation
Hato Tejas TC $6.9 million
Construction
Las Cruces TC $6.3 million
Construction
Juncos TC $9.3 million
In Operation
San Juan GIS$62.5 million Construction
Costa Sur –Cambalache$74.0 millionEvaluation
Costa Sur – AguasBuenas
$99.0 millionConstruction
Mayagüez UG Circuit
$17.7 millionIn Operation
Vega Baja – Vega Alta UG Circuit
$10.5 millionIn Operation
Isla Grande TC$24 million
In Operation
Martin Peña TC$27.4 millionIn Operation
Major Planned Transmission
Improvements Through 2014
Reduce Fossil Fuels Dependency
• We signed five renewable energy source contracts
Waste to Energy
Caguas 50MW
Arecibo 55MW
Wind Projects
Guayanilla 40MW
Arecibo 50MW
Naguabo 40MW
• Other Projects under consideration
Windmill Projects in various locations 50MW
Solar - Guayama 50MW
Biodiesel Project
20 Additional Proposals in evaluation
• Energy Wheeling in development – Renewable
energy private companies accessing PREPA’s
transmission system
Disclaimer
Today’s presentation includes certain statements that are not historical in nature
but reflect forecasts and “forward-looking statements,” for example, statements
regarding anticipated future financial and operating performance and results,
including estimates for growth. Actual results may differ materially from those
expressed or implied by such forward-looking statements. These statements are
based on the Puerto Rico Electric Power Authority’s current beliefs regarding
future events, and are based upon a number of estimates and assumptions that
are subject to significant uncertainties, many of which are outside the control of
the Puerto Rico Electric Power Authority, Government Development Bank for
Puerto Rico, the Government of Puerto Rico and its agencies and
instrumentalities.
This presentation is not an Official Statement and does not constitute an offer to
sell or to purchase bonds, nor a solicitation of an offer to sell or to purchase
bonds in the Commonwealth of Puerto Rico, the United States, or in any
jurisdiction where such offer, solicitation or sale may be unlawful. This
presentation has been prepared solely for informational purposes, and should
not be construed as a recommendation to buy or sell any security or to
participate in any particular trading.
