{"id":100966,"date":"2017-10-30T12:00:58","date_gmt":"2017-10-30T12:00:58","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=100966"},"modified":"2017-11-06T09:53:55","modified_gmt":"2017-11-06T09:53:55","slug":"disaster-capitalists-take-big-step-toward-privatizing-puerto-ricos-electric-grid","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2017\/10\/disaster-capitalists-take-big-step-toward-privatizing-puerto-ricos-electric-grid\/","title":{"rendered":"Disaster Capitalists Take Big Step toward Privatizing Puerto Rico\u2019s Electric Grid"},"content":{"rendered":"
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A Puerto Rico Electric Power Authority employee fixes power lines in Santurce, San Juan, Puerto Rico, on Thursday, Oct. 19, 2017. Photo: Xavier Garcia\/Bloomberg News\/Getty Images<\/p><\/div>\n

26 Oct 2017 – <\/em>The board that oversees Puerto Rico\u2019s finances has taken its most conspicuous step toward privatizing the island\u2019s power grid, a long sought-after prize that has been put on a plate by Hurricane Maria.<\/p>\n

The federally appointed control board announced<\/a> that it intends to put the Puerto Rico Electric Power Authority, or Prepa \u2014 the island\u2019s sole, beleaguered power utility \u2014\u00a0under the direction of an emergency manager.<\/p>\n

That manager will be Noel Zamot, who will become Prepa\u2019s \u201cchief transformation officer.\u201d Zamot, who is Puerto Rican, is a known entity to the control board. It appointed him this summer to serve on its executive committee as the revitalization coordinator. His role mainly involved attracting private investment under Title V of PROMESA, a provision allowing for an expedited social and environmental review of major infrastructure projects. Since that time, he\u2019s been in charge of something called the Critical Projects Process<\/a>, soliciting proposals from a slew of private actors. As of mid-September, Zamot had fielded 12 proposals according to his Twitter<\/a>, many of which have to do with energy infrastructure.<\/p>\n

His first job will be\u00a0to help return electricity to around 80 percent of Puerto Ricans still without power following the storm. His second could be turning that power over to private hands, a pattern described by The Intercept\u2019s Naomi Klein as the \u201cshock doctrine.<\/a>\u201d<\/p>\n

Months before either hurricanes Maria or Irma struck, the board had been enthusiastic about the prospect of privatizing Prepa, which is $9 billion in debt. Oversight board chair Jos\u00e9 B. Carri\u00f3n III was explicit about one of Zamot\u2019s main goals shortly after<\/a> he was brought on: to \u201cprivatize the Electric Power Authority as soon as possible,\u201d as he told the Puerto Rican newspaper Metro at the end of August.<\/p>\n

In June, four of his seven colleagues on that control board wrote a Wall Street Journal op-ed<\/a> calling openly to privatize Prepa, and in July they contracted with the consultancy firm McKinsey to \u2014 among other things \u2014 draw up \u201cdetailed privatization\/corporatization plans supported by financial models and market engagement.\u201d<\/p>\n

Now Zamot will get the chance to carry out that job directly and may want to put a green spin on it.<\/p>\n

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Noel Zamot at the Presentation of the Platform of Critical Infrastructure Projects, in San Juan, Puerto Rico on Aug. 23, 2017. Photo: Andre Kang\/GDA\/El Nuevo Dia\/Puerto Rico\/AP<\/p><\/div>\n

Puerto Rican Gov. Ricardo Rosell\u00f3 has been friendly to privatization as well, and shortly after coming into office this year, he installed new leadership at the utility. Prepa\u2019s new top brass has been roundly criticized by UTIER, the island\u2019s utility workers\u2019 union, which has alleged that they have intentionally stalled recovery efforts to prime the pump for privatization and make the utility appear more dysfunctional than it is.<\/p>\n

Yet the board has also gone to battle with hedge fund creditors on behalf of Puerto Rico. Prepa and the utility\u2019s creditors had struck a draconian debt restructuring agreement before the board stepped in and rejected it, kicking the negotiations over to bankruptcy-style proceedings outlined in Title III of PROMESA, a law passed by Congress last summer that installed the board in the name of getting the island\u2019s fiscal house in order. Hedge funds have less power in a bankruptcy setting and aren\u2019t likely to get anywhere near as good a deal as the one they\u2019d locked down earlier.<\/p>\n

The same goes for the broader debt. Puerto Rico currently sits in at least $74 billion in municipal debt, much of which is held by<\/a> hedge and mutual funds. The board, in turn, serves as a kind of mediator between the Puerto Rican government and its creditors, who are eager to extract as much cash from the island as quickly as possible. Insulated from bondholder lawsuits, the fate of Puerto Rico\u2019s debt \u2014 including Prepa\u2019s \u2014 now rests with federal\u00a0Judge Laura Taylor Swain, in New York.<\/p>\n

In a press statement<\/a>, oversight board Executive Director Natalie Jaresko said, \u201cThe appointment of Noel is an essential step in achieving the goals of reliable, competitively priced electricity and attracting the private capital we need to revitalize the economy of Puerto Rico.\u201d She also asserted that it \u201cit is common practice in reorganization cases for a debtor in possession to name a chief restructuring officer to effectively manage the entity while it is in bankruptcy.\u201d<\/p>\n

Zamot\u2019s professional background has been varied and doesn\u2019t appear to have much to do with either electric utilities or debt restructuring. He has a degree in engineering, served in the Air Force, and has spent stints working at the United States Space Command, NATO, and the Wyle Aerospace Group\u2019s acquisition management division. Before being brought on by the fiscal oversight board, he was serving as the head of Corvus Analytics, a cybersecurity firm he founded in the Boston area.<\/p>\n

Now charged with getting Prepa\u2019s fiscal house in order by any means necessary, Zamot appears perhaps most excited about a more eco-friendly privatization push. On October 11, he penned a post on LinkedIn, later added to Medium<\/a>, praising Tesla CEO Elon Musk\u2019s recent interest in helping to support post-Maria rebuilding efforts, as well as the friendly exchange between the space, tunnel, and energy mogul and Rosell\u00f3.<\/p>\n

\u201cThe mere fact that Gov. Rosell\u00f3 has enthusiastically supported Musk\u2019s offer is in itself a very positive development,\u201d Zamot wrote. \u201cIt clearly signals to private investors that the island is seriously considering innovative solutions to its energy challenge. Investors are correct in interpreting this as a signal that everything is on the table, and that those with truly innovative solutions (backed by smart capital) will be warmly considered by the government.\u201d<\/p>\n

He\u00a0went on to note that \u201cTesla\u2019s solutions will be necessary, but insufficient on their own to truly transform PR\u2019s energy sector,\u201d suggesting instead that Puerto Rico has to \u201creset mental models regarding energy strategy,\u201d and that private investors looking to get involved with Prepa will now have to contend with ratepayers who are now excited about switching to renewable energy. \u201cPublic entities now know that everything<\/em> is on the table. And the government has uncorked the energy genie\u2019s bottle and set expectations for the future quite high,\u201d he added (his emphasis).<\/p>\n

\u201cIt is safe to say that Elon Musk will not be the only private stakeholder in this promising future,\u201d Zamot concluded,\u00a0\u201cbut he just may be the catalyst that started it all.\u201d<\/p>\n

Earlier this week, the company returned power to a children\u2019s hospital in Puerto Rico with a solar panel and battery array, which they promised would be the \u201cfirst of many<\/a> solar + storage projects to come.\u201d Details on future projects have yet to emerge; Tesla\u2019s island power projects to date<\/a> have been orders of magnitude smaller than the job they would face in Puerto Rico.<\/p>\n

Zamot\u2019s excitement about<\/u> a privatized, green energy future in Puerto Rico stands at odds with the restoration contracts that the utility and federal agencies involved in repair efforts have handed out thus far. Cobra Acquisitions LLC, for instance \u2014 contracted by Prepa for up to $200 million to provide transmission and distribution line repair \u2014 is the wholly owned subsidiary of Mammoth Energy Services,\u00a0a company that\u2019s main business is providing support for fracking and tar sands extraction.<\/p>\n

Most controversial has been the $300 million contract awarded to Whitefish Energy, a tiny Montana-based company founded in 2015 and with little experience carrying out large-scale grid repair. Earlier Wednesday, Whitefish sparred<\/a> with San Juan Mayor Carmen Yul\u00edn Cruz on Twitter. Other contracts announced so far include Weston Solutions, brought on by the U.S. Army Corps of Engineers, which has been placed in charge of emergency rebuilding efforts.<\/p>\n

All signs point to current Prepa leadership and contractors wanting to rebuild the utility as it was: corrupt, overly dependent on costly, imported oil, and perilously fragile. Zamot, at the direction of the fiscal oversight board, could turn it into a playground for Silicon Valley. It is eminently possible<\/a> to rebuild a more resilient energy system in Puerto Rico that doesn\u2019t either run on fossil fuels or put the needs of corporate shareholders ahead of the island\u2019s residents. Hurricane Maria could be the perfect opening to put just such a system in place, and Puerto Rico\u2019s own history<\/a> offers some guidance as to what an effort on that scale \u2014 a broad economic reconstruction \u2014 might look like. Crisis, in other words, isn\u2019t only an opportunity for society\u2019s worst actors.<\/p>\n

Zamot, the fiscal oversight board, Tesla, and Prepa officials could be reached for comment in time for publication.<\/p>\n

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