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In spite of objections from over twenty municipalities, the judge managing the Puerto Rico Electric Power Authority’s (PREPA) bankruptcy proceedings approved the debt resolution with Cobra Acquisitions for efforts to restore the electrical grid post the devastation caused by Hurricanes Irma and Maria in 2017.
Swain delivered her decision during Wednesday’s comprehensive hearing concerning PREPA’s bankruptcy situation.
At least 15 municipalities contest the agreement with Cobra Acquisitions, arguing they stand to lose $75 million in construction and municipal taxes. The government maintains that the arrangement does not prevent towns from pursuing the tax payments due for construction work conducted by Cobra.
On July 31, PREPA consented to support Cobra Acquisitions in its municipal tax contention, having reached a $188 million settlement with the enterprise.
Cobra initially claimed that PREPA owed $406 million, which included interest on expenditures for work carried out over five years ago following the destruction wrought by Hurricanes Maria and Irma on the island.
PREPA is to disburse $150 million to Cobra within 10 business days after Swain endorses the settlement, followed by an additional $20 million once the electric utility’s bankruptcy plan secures confirmation.
While PREPA agreed to support Cobra in the tax dispute, it will not bear responsibility for the funds should Cobra ultimately lose.
During the hearing, Swain indicated that the municipalities infringed on PREPA’s automatic stay by retaining the funds that the utility was set to allocate for Cobra’s payment.
The municipalities asserting that Cobra owes them money include: Gurabo, Las Piedras, Humacao, Caguas, Salinas, Arroyo, Cayey, Guayama, Yabucoa, Guaynabo, Patillas, Maunabo, Ceiba, Naguabo, and Utuado.
Foreman Electric Services also contested the payment to Cobra; however, Swain ruled that the company lacked the standing to intervene in the matter.
