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PREPA bonds (Puerto Rico Electric Power Authority bonds)


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The bonds are now trading at 40 cents per dollar. Does anyone have thoughts about it? The current liquidity is still good, but they have no money for conversion to gas powered plants.

According to Mark Palmer:

"Albert explained that largely as a consequence of the fact that PREPA’s power generating units burn oil, the Commonwealth’s electricity costs average between $0.26 and $0.27 per kilowatt hour (kWh) in contrast to average electricity costs of approximately $0.11 per kWh on the U.S. mainland. These high costs have been a headwind for Puerto Rico’s struggling economy by burdening both the island’s citizens and its industrial base.


Of that $0.26 to $0.27, approximately $0.21 is due to the cost of oil, while just $0.03 is attributable to debt service.


Read more: http://www.btigresearch.com/2014/06/27/assured-guaranty-ago-puerto-ricos-prepa-in-focus-during-btig-hosted-investor-meetings-with-management/#ixzz36MhzWWo9"


So the debt doesn't really seem to be the primary issue here, compared to other operating costs.


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