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February 19, 2018

Head of Puerto Rico's electric power authority resigns

Head of Puerto Rico’s electric power authority resigns

Ricardo Ramos, the executive director of Puerto Rico’s Electric Power Authority (PREPA), resigned Friday, according…

Ricardo Ramos, the executive director of Puerto Rico’s Electric Power Authority (PREPA), resigned Friday, according to authority spokesperson Odalys de Jesus.


The embattled state-owned utility has faced scrutiny over how fledgling companies won lucrative deals over larger, more established utilities. Many question whether the authority followed the appropriate steps in awarding the contracts.

The resignation was submitted to the power authority’s board and is effective Friday, according to a statement from the authority.

Authority ignored lawyers’ advice on $300 million deal, documents show

Public outrage and a series of government reviews forced Puerto Rico’s state-owned utility to cancel a $300 million deal with Whitefish, a small Montana-based firm with only two employees at the time Hurricane Maria hit.

The electric utility ignored advice from its attorneys before inking the controversial contract with Whitefish Energy.

Documents released by the House Committee on Natural Resources late Monday show that attorneys for the authority advised the state-owned utility to make critical changes to the contract it was negotiating with Whitefish to ensure it was compliant with the Federal Emergency Management Agency’s provisions.

PREPA’s outside counsel, Greenberg Traurig, provided a detailed list of clauses that were either recommended or required to be fixed in the contract, including those tied to payment and the ability to terminate the deal, according to emails contained in 2,000 pages of internal documents released by the House panel.

In addition, FEMA’s attorney in Puerto Rico, Graciela Zavala-Garcia, wrote to attorneys at Greenberg Traurig on Oct. 12 saying the agency’s chief counsel “concluded that the PREPA contract does not contain some necessary provisions.”

Still those warnings were not heeded by the authority.

Instead, the authority pressed ahead with the deal on Oct. 17, disregarding lawyers’ recommendations, including terms for canceling the contract, ceiling prices and breach of contract.

Other firm received $200 million contract

Cobra Acquisitions, a subsidiary of Oklahoma City-based Mammoth Energy that’s less than a year old, won a $200 million contract last month from the authority to help repair and reconstruct the crippled island’s utility infrastructure over the next 120 days.

The deal is one of two major contracts greenlighted by the authority that have come under scrutiny on Capitol Hill since recovery efforts began on the island over a month ago.

Mammoth CEO Arty Straehla told analysts on an Oct. 20 conference call that FEMA was “in the room” and involved in “every step of the way” when PREPA was crafting the deal with its Cobra division.

FEMA declined to address whether it participated in the discussions. Instead, a FEMA spokeswoman told CNN that Cobra’s contract was “solely between PREPA and the other party.”

Mammoth, an oilfield services company that provides hydraulic fracturing services, is just three years old itself. It bought Cobra for $8 million earlier this year to expand into the utility infrastructure business.

As of Oct. 1, Cobra had 58 fleets and roughly 275 employees. It has also been involved in repairs in Texas and Florida following hurricanes Harvey and Irma.

Recently, the company has had 69 workers in Puerto Rico with plans to bring in over 500 more in the coming days, Cobra spokesman Matt Wagner told CNN Nov. 6. Barges with equipment and supplies, including accommodations, are also on their way to the island, he said at the time.

As part of its deal with the authority, Straehla said Cobra agreed to provide accommodations, freshwater generation and medical facilities for its workers. The authority agreed to pay Cobra $15 million upfront to cover the costs of mobilizing forces to the island, he said.

It’s unclear how the authority could afford that upfront payment. Only a few weeks earlier, the bankrupt utility, which was $9 billion in debt as of Nov. 6, said it picked Whitefish over another contender: PowerSecure, a subsidiary of Southern Co., because it couldn’t afford to pay the $25 million down payment the firm required.

Straehla reassured Mammoth’s investors that the terms of the deal complied with FEMA’s reimbursement requirements, signaling Cobra would be paid for its work.

Typically, agencies like PREPA will pay a contractor first as part of a disaster relief deal. Then it would submit a request for reimbursement to FEMA, which would then audit the expense and determine if it is eligible for repayment, an agency spokesperson told CNN.

Source: Head of Puerto Rico’s electric power authority resigns

Head of Puerto Rico’s electric power authority resigns


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