Puerto Rico Water Resources Authority (december 1970)

December 1970

Wafer Resources Authority

A Special Report

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PUERTO RICO WATER RESOURCES AUTHORITY

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1950 - Our Growth - 1970 621.311 Banco Gubernamental de B213s Fomento para P. R. Dec.l9T0 - A special report, onc.l. ■ Puerto Rico Water Resour ces Authority.

Sales of electricity Revenues from sales

e months ended Times

le 30, 1970

,315,000

15.8

,773,000

11.9

Customers (numbe."

Average sales per cl Average revenue pe;

621,311

para Puerto- Rico.-

Generation requiren Dec. 1970 Annual peak deman Generating i

c.l.

■

691,000

3.9

9,565

4.0

195.52

3.0

516,000

14.5

Banco Gubernamental de- -Fomento

B213s

-

-A special-report oh P-.- R. Water'Resources'Authority. -

Revenues (i

Increased

1S5 200

12.3

10.7

Date Due

Current exp

DEMCO NO

SQ*;

12.2 14.1

Balance of r

10.4

Contribut

12.4

Other coi

12.6

Contractual

Electrical

12.0

Construct

4.7

Electric plai Long term d

9.2

Equity of the

7.3

ON THE COVER

T/ie most up-to-date computerized control systems keep electric power production and distribution by the Water Resources Authority at peak efficiency.

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Commonwealth of Puerto Rico PUERTO RICO WATER RESOURCES AUTHORITY

i I. 9 9 gS&SS- •

Governing Board Chairman: DR. ANTONIO SANTIAGO VAZQUEZ Vice-Chairman: RAFAEL NEVARES

Members: JORGE CAMUNAS

Governor Luis A. Ferre

RAFAEL MACHARGO DEL RIO RAFAEL MARTINEZ GIRALT

Principal Officers Officers

FELIX CORDOVA DIAZ Executive Director

RENAN COLON

JULIO NEGRONI Vice Executive Director

JAVIER CUEVAS BENITEZ

DR. MODESTO IRIARTE Assistant Executive Director — Electrical Planning, Construction and Research

RAFAEL REYES GARCIA

JOSE ISMAEL DIAZ

JOSE VILA RUIZ

Chief Engineer

General Manager — Services and Supply

Assistant Executive Director

Finance

General Manager — Irrigation Services General Counsel

CARLOS VELAZQUEZ TORQ Assistant Executive Director — Power Operations

ANTONIO BUSCAGLIA

RAFAEL VAZQUEZ COLON Assistant Executive Director Industrial Relations

HUMBERTO CORDERO

Head, Production and Transmission Division Head, Distribution and Sales Division

and Personnel WILLIAM CANDELARIO

Head, Electrical Planning and Research Division

Consulting Staff

JOSE A. MATOS

HAROLD TORO

Head, Power Design and Construction Division

Special Assistant to the Executive Director

JOSE B. CANDELAS Controller LOUIS ROIG

Trustee

First National City Bank, New York, N. Y.

Treasurer

JULIO C. MUNIZ

Consulting Engineers Jackson and Moreland Division of United Engineers and Constructors Inc.

Head, Purchasing Division JUAN RAMOS VELILLA Head, Personnel Division CARLOS E. LUBE

Auditors

Arthur Andersen & Co.

Head. Industrial Relations Division HECTOR M. MORALES

Head, Transportation and Services Bond Counsel

Mitchell, Petty & Shetterly

DAVID BRAVO. JR. Public Relations Officer

Puerto Rico

Felix Cordova Diaz Executive Director

Water Resources Authority The supply of electric energy in Puerto Rico's fast

growing economy is the responsibility of the Puerto Rico Water Resources Authority, an autonomous

tion Bootstrap." By 1956, for the first time in Puerto Rico's history, net income from manufacturing sur

public service corporation and instrumentality of the

passed that from agriculture. Today over 1,800 new factories, promoted under the economic development

Government of the Commonwealth of Puerto Rico.

program, are in operation. Such rapid growth and

The origin of the Authority goes back to the opera tion of two government agencies which began the

profound change in the basic character of the econ omy has created a continuous and rapid rise in the

development of hydroelectric power in Puerto Rico —the Puerto Rico Irrigation Service, which built its first generating plant in 1915, and the Utilization of

demand for energy.

Water Resources of Puerto Rico, created in 1927. In

steady and most impressive. The comparative figures

1941, the Authority was established by law to replace

shown on the inside of the cover page speak for

the Utilization of Water Resources and ensure a

themselves.

growth in the supply of electricity which would be

From its inception the Authority has had to con stantly add new capacity to keep up with, and antici pate, the mounting demand for electric power. New

adequate for the future needs of Puerto Rico's eco nomic development. Subsequently, during the World War II fuel shortage, the two large private electric utilities on the Island were taken over by the United States Government as an emergency measure and

their operation entrusted to the Authority. In 1944, these systems were purchased by the Authority and, at a later date, the electric facilities of various irri

gation services were integrated into the Authority's system.

When the Authority began operations in 1941, the

Throughout the twenty-nine years elapsed since the Authority came into being its growth has been

generating capacity has been added almost every year. Since 1944 total name plate rating of the Au

thority's generating plant has risen from 64,440 Kw to the present capacity of 1,497,840 Kw. Annual capital construction expenditures in recent years have reached as high as $100.7 million.

The capital construction program for 1970-71 is estimated at $115.0 million. It includes work on the fifth and sixth units of the South Coast Plant

Island's economy was primarily agricultural and

which will have a capacity of 410,000 Kw each.

heavily dependent on a single crop—sugar. In the

Other important projects included in the program

latter half of that same decade, an industrialization

are Units No. 1 and 2 of 450,000 Kw each at a new

program for the Island was begun as part of "Opera

steam plant to be constructed in Aguirre in the

southeast and several jet and gas turbine peaking units throughout the system.

This program also includes general transmission and distribution facilities, rural electrification proj ects, the acquisition of land and the construction of buildings, and other miscellaneous improvements.

The Authority has grown to become the second largest municipally owned, integrated electric utility in the United States as is indicated by the following

capacity of 1,601,320 Kw. The physical plant pres ently consists of twenty-four generating stations, of which fifteen are hydroelectric, four are thermalelectric, one is diesel and four are jet peaking units.

Thermal-electric facilities now supply about 97 per cent of the electric energy generated. The Author ity's four main generating stations had a total in stalled name plate rating of 1,393,000 Kw as of June 30, 1970.

tabulation: City of Los Angeles

Puerto Rico

City of Seattle

Department of Water Resources Department of Water and Power Authority Lighting

Net Plant Electric Revenues

As of

As of

As of

Dec. 31, 1969

June 30, 1970

Dec. 31, 1969

$1,262,251,126 200,439,769

$655,564,627 132,722,966

$314,969,868 52,626,909

1,090,704

690,725

260,340

Number of

Customers

...

Present Electric System The total installed generating capacity of the Author ity at the end of June 1970 had a name plate rating of 1,497,840 Kw and maximum dependable

Thermal-electric Stations

The Palo Seco Steam Plant, near San Juan, was placed in service in 1960 and has an installed capacity of 411,000 Kw in one 216,000 Kw, two

82,500 Kw steam-electric units and two jet peaking units of 20,000 Kw and 10,000 Kw, respectively.

These units, which are powered by a keroseneburning aviation type jet motor, are used for peak ing and for emergencies, being designed for auto matic synchronization to the line from a cold start

To meet the increasing demand for industrial power in Southern Puerto Rico, two 410,000 Kw units are

being added to our South Coast Steam Plant near Ponce.

This plant has an installed capacity of 263,000 Kw. In the background is the Commonwealth Oil Refining Co.

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PUERTO RICO WATER RESOURCES AUTHORITY twneii «e.oeo«v*

tan

c»>i2i6 000 H74H7fiKVfl

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II^OOKVA

n.OOQKVA

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ismsuiy

VIM ill* |4

ll,300KVA ^ ll,300KVA

I2,000KVA

A^POKVA

^

^4,000KVA

II.300KVA S6,000 KVA

11,100

6,000KVA HomnsuDioi

ll,2S0KVA

(•174)

ELECTRICAL rA

NUCLEAR PLANT (FUTURE)

^ASUIRHE FUTURE

SYSTEM

JUNE 30. 1970

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in only two minutes. In July 1970, a 216,000 Kw unit was placed in service.

The South Coast Steam Plant, near Ponce, has

two 44,000 Kw, two 82,500 Kw steam-electric units and a 10,000 Kw jet peaking unit. One of the out standing features of this plant is that it can burn either low cost refinery pitch or Bunker C fuel oil.

This plant currently receives its fuel by direct pipe line from the nearby refinery at the Commonwealth

Oil Refining Co. To meet the increasing demand for industrial power in Southern Puerto Rico two 410,000 Kw units are being added to this plant and are expected to be in service by September, 1971, and January, 1972, respectively.

The San Juan Steam Plant has an installed ca

pacity of 598,000 Kw in four 20,000 Kw, two 44,000 Kw, four 100,000 Kw steam-electric units and two jet peaking units with a combined capacity of 30,000 Kw.

The Mayaguez Plant is equipped with two gas turbine generators whose rated capacity is 20,000 Kw each. The main purpose of these turbines is to handle peak loads. A 10,000 Kw jet peaking unit was also installed increasing the capacity of this plant to a name plate rating of 50,000 Kw. There is now in the design stage another steam plant to be located in Aguirre in the southeastern region of Puerto Rico. Initially, this plant will have two 450,000 Kw units which are scheduled to be

placed in service in January 1973 and January 1974, respectively.

The Authority has in operation, in addition to those jet power pack units located at plant sites, four jet power pack units throughout the system.

Five additional 40,000 Kw gas turbine generators

will be installed throughout the system as follows, two in 1971, two in 1972 and one in 1973.

There is a small 1,000 Kw diesel plant for emer gency purposes on the island of Vieques.

Nuclear Power Station

Hydroelectric Stations

Construction of a nuclear power plant of 600,000

There are 15 hydroelectric plants with a total in stalled capacity of 104,840 Kw. Eleven of these plants have reservoirs which permit regulation of

Kw will begin in 1971 at Aguirre in the munieipality of Salinas at a cost of $135,000,000. The new plant, which can operate continuously without refueling for periods of more than a year, will provide electric energy sufficient to serve more than 200,000 middle

plant output by collecting and storing water inflows during the rainy season for utilization during the dry season, and the remaining four operate on run-ofthe-river flows. Ten of the hydroelectric plants are non-attended and fully automatic.

income homes. It is expected that the plant will be in operation in 1976. The nuclear plant does not emit fumes and it is safe and clean in its op erations. Thus, it contributes directly to the con trol and limitation of air pollution. The Aguirre

The Authority's transmission system consists of

plant has a greater capacity than any other in op eration today and will be the largest in Latin

controlled and sectionalized at 135 substations and

America.

sectionalizer stations, with a total name plate trans-

Transmission and Distribution Systems 1,642 circuit miles of 115 Kv and 38 Kv lines,

Tlie Minillas Government Center in Santiirce will cost

$16 million. The project, scheduled to be completed in 1972, will consist of three buildings—two of them 17 stories high—and will house the Labor Department, the Planning Board and the Government Development Bank.

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former capacity of 2,416,425/3,514,875 Kva lo

cated at suitable points throughout the system to insure stability of service and provide an adequate island-wide network. The transmission system also includes a submarine cable 9.5 miles long which was placed in service during May 1963 to connect the electric system of the island of Vieques to the Authority's system.

Distribution

facilities

include

227

substations

owned by the Authority with a capacity of 1,194,162/1,691,514 Kva which, supplied from the transmission network, convert the electric power for distribution at 2,400/4,160 Y; 4,800/8,320 Y; and 7,620/13,200 Y volts through distribution feeders which traverse all the island. In addition, there are 225 privately-owned distribution and in

terchange substations with a total capacity of

581,295/658,266 Kva to serve industrial custom ers, making a total installed capacity of 1,775,457/ 2,349,780 Kva. Rural Electrification

Through successive amendments to an original loan contract for $6,376,000, entered into in 1952 be

tween the Authority and the Rural Electrification Administration of the United States, the Authority has borrowed to date $77,040,000 on bonds bearing interest at the rate of 2% under a loan contract now

totaling $79,040,000. These funds have been loaned

by REA for the construction of generation, trans mission and distribution facilities to serve rural cus tomers.

By law, the Commonwealth Government contrib utes to the Authority the annual amounts required to

GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1946 Sales Fiscal Year

(Thousands

(June 30)

of Dollars)

(Million Kwh)

Customers^ (End of Period)

Maximum Peak Load

Average Load

Hours per

(Kw)

(Kw)

Customer

Kilowatt

Revenue per

Kilowatt Hour

Revenue per Customer

$ 46.13

5,764

258.6

124,959

63,000

39,000

2,069

$.0223

1950-51

13,006

488.2

185,090

109,000

69,000

2,638

.0266

70.27

1955-56

25,216

930.8

314,853

210,000

129,000

2,956

.0271

80.08

1956-57

28,693

1,078.4

338,685

249,000

153,000

3,184

.0266

84.72

93.58

1945-46

$

1957-58

33,973

1,298.8

363,032

272,000

181,000

3,578

.0262

1958-59

35,781

1,421.6

385,592

314,000

198,000

3,687

.0252

92.79

1959-60

40,441

1,667.4

408,671

355,000

231,000

4,080

.0243

98.96

1960-61

45,304

1,892.4

435,019

398,000

261,000

4,350

.0239

107.34

1961-62

50,846

2,145.4

459,995

439,000

294,000

4,664

.0237

113.44

1962-63

57,520

2,465.6

487,991

498,000

335,000

5,053

.0233

121.20

1963-64

65,865

2,858.4

517,682

560,000

388,000

5,522

.0230

130.85

1964-65

72.952

3,186.3

552,11 1

637,000

436,000

5,771

.0229

132.13

1965-66

83.734

3.771.7

581,369

737,000

506.000

6,488

.0222

144.03

1966-67

93.233

4,291.8

608.462

825,000

575.000

7.053

.0217

153.23

1967-68

104.271

4.894.8

635.155

939,000

657,000

7,706

.0213

164.17

1968-69

1 18,883

5,707.0

664.770

1.078.000

760,000

8.585

.0208

178.83

1969-70

132.773

6,495.3

690,725

1.185.000

861,000

9,565

.0204

195.52

SALES OF ELECTRICITY • KH Ulllions of KWH

NUMBER OF CUSTOMERS

8,000

Thousmds

i Other Industrial 750

^3 Conanerdal Residential

625

500

375

250

125

Fiscal

'62

'63

'64

'65

'66

'67

'68

'69

'70

'71*

Years

Illllllll '69

'70

'71-

*Estlmated

Source: P.R.W.R.A. Financial Reports

guarantee that the Authority recovers the complete

Bonds outstanding, including the REA issues, totaled

cost of service to customers served under the REA

$524,840,000 as of June, 1970.

program, in the case that revenues do not provide an adequate contribution to fixed costs.

In addition, a substantial amount of the Capital Improvement Program has been financed directly from revenues of the Authority. In the period

Financing System Growth

from May 1, 1947 to June 30, 1970, a total of

Under its enabling legislation, the Authority has the power to borrow money and issue revenue bonds for its corporate purposes and to secure the payment of

Of this amount $578,566,000 has been provided

$797,441,000 was invested in capital improvements.

from the net proceeds of bond issues and bank bor

these bonds under a Trust Indenture. It also has full

rowings, and $218,875,000 had come mainly from

authority to set and collect adequate rates and other charges for the use of its facilities, and has complete control and supervision over its properties and activi ties. Properties may be acquired by the Authority by any lawful means, including the power of eminent

net revenues of and contributions to the Authority.

domain.

For many years the Authority has followed a pol icy of initially financing the construction of facilities under its Capital Improvement Program with short term bank loans. From time to time, issues of reve nue bonds are sold for the repayment of such loans and for the continuance of construction. In this way

the facilities producing income for the support of long-term obligations are to a large extent already in operation by the time such obligations are issued.

On June 30, 1970, total net assets amounted to $801,886,000, operating and appropriated reserves were $40,572,000, contributed capital and unappro priated net revenues were $143,851,000 and out standing debt was $559,201,000.

Total revenues for the twelve months ended June 30, 1970, were $137,604,000. Current ex

penses were $75,984,000, leaving a balance of $61,620,000 available for debt service requirements and other contractual obligations. The maximum

debt service for any future year on outstanding issues was $31,564,000, indicating a coverage of 1.97

times on present debt. Accruals for contributions to the Commonwealth and municipal governments

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University of Puerto Rico—Mayagiiez Campus of

Agriculture and Mechanical Arts College. This is one of several branches of the U.P.R. throughout the Island

The Petrochemical Complex of Phillips Petroleum at Cuayama is one of the most important enterprises of Puerto Rico.

in lieu of taxes amounted to $14,551,000 during the same period.

and will be covered about 1.75 times by net earnings for the twelve months ended September 30, 1970.

The rapid expansion in facilities and improvement of service over the past decade has been carried out without raising the Authority's rates. Constant in

creases in demand have consistently resulted in a yearly growth in revenues and in substantial reserves adequate to meet the Authority's operating expense and contractual obligations.

New Bond Issue

In December 1970, the Authority proposes to sell $60,000,000 Electric Revenue Bonds for the pur

pose of liquidating a portion of current bank bor rowings and continuing the Capital Improvement Program.

Looking Ahead

Continuous studies of power needs, constantly re viewed and revised by the Authority and its consult ing engineers, now indicate that peak demand of the system will increase from 1,185,000 Kw in 1969-70 to 1,413,000 Kw in 1970-71, 1,679,000 Kw in 1971-72, 1,986,000 Kw in 1972-73 and 2,258,000 in 1973-74. It is expected that about 30,000 new

customers will be added yearly. To meet this de mand, the Authority's generating capacity will be raised to a name plate rating of approximately 3,000,000 Kw by 1973.

During the period from July 1, 1970 through

Preliminary calculations indicate that the Author

June 30, 1974, it is anticipated that the Authority

ity's maximum annual debt service, upon the comple

will invest $524,998,000 in further capital improve ments. Of this amount, the sale of bonds will pro-

tion of the financing, will approximate $35,400,000

vide some $407,184,000. About $114,691,000 or

21.8% will be derived principally from revenues of the Authority. The remainder of $3,123,000 will be available from previous bond issues.

It will be noted that the capital improvement pro gram shows a substantial increase over the next four

years. The reason for this is that the Authority has

found it necessary to increase the size of the gener ating units scheduled for 1971 and 1972 to 410 MW to serve large metallurgical processors, thus exceed

ing the normal growth of the system. The Economic Development Administration has been promoting the establishment of these plants. Since these plants are expected to be the core of industrial complexes which will foster general economic development, the Au thority under special agreements with the Common wealth Government is willing to provide power at prices based on the incremental cost of power of the larger units. In order to make the construction

of the larger units economically feasible for the Authority, the Legislature of Puerto Rico approved Law #82 of 1967, as amended by Law 140 of 1968, which guarantees to reimburse the Authority for

any part of the annual charges on whatever portion of the extra capacity that remains unsold during

the period of 1971 to 1974 up to a limit of $3,250,000 during each of these four years.

It also guarantees the reimbursement, (effective after 1974, and for a period of not more than six

years), of the resulting difference between the cost of the fuel used to generate the power sold to said industries computed on the average price of the fuel used in our system and that resulting if com puted on the basis of a unitary price of 24 cents per 1,000,000 BTU up to a limit of $3,000,000 during

any year of the period. Such amounts would be deducted from the contribution in lieu of taxes pay able to the Commonwealth Government.

The above four-year program compares with capital expenditures actuaUy made during the past twenty-three years, distributed as follows: steam

production plant $305,000,000, hydraulic production plant $36,483,000, gas turbine production plant $21,347,000, transmission plant $96,289,000, dis tribution plant $227,059,000 and other facilities $111,263,000, for a total of $797,441,000.

Millions of Dollars

REVENUES FROM SALES OF ELECTRICITY

TOTAL REVENUES. BALANCE AFTER CURRENT EXPENSES. AND DEBT SERVICE REQUIREMENTS

Millions of Dollars

I Tolal Revenues

] Balance After Current Expenses

V///A Residential

IHI Total

- V///A Debt Service Requirements

Fiscal

Years

•Estimated Source- P R W R A Financial Reports

_a_ Fiscal Years

'62 '63 '64 '65 'Estimated Source- P R W R A Financial Reports

Puerto Rico Water Resources Authority

Condensed Balance Sheet June 30, 1970

ASSETS

NET UTILITY PLANT:

Gross utility plant Less accumulated provision for depreciation Net utility plant

$786,118,285 130,553,658

$655,564,627

OTHER PHYSICAL PROPERTY

527,487

BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS . . . .

22,854,669

CURRENT ASSETS:

Funds and working advances Accounts receivable—Less Reserve for uncollectible accounts Materials and supplies Prepayments, special deposits, etc

$ 38,375,228 33,320,148 30,936,856 1,529,516

104,161,748

DEFERRED DEBITS:

Debt discount and expense in process of amortization Other TOTAL ASSETS

$ 15,502,462 3,274,711

18,777,173 $801,885,704

LIABILITIES

CONTRIBUTED CAPITAL

$ 49,423,185

UNAPPROPRIATED NET REVENUES

94,427,509

LONG-TERM DEBT:

Electric revenue bonds $524,840,000 Notes payable 31,600,000 Lease-purchase obligation, less portion included in current liabilities . . . .

2,760,739

559,200,739

CURRENT LIABILITIES:

Accounts payable Customers' deposits and accrued interest Accrued interest on Electric Revenue Bonds Accrued contributions in lieu of taxes Other

5 16,800,500 6 512,240 11,112,222 14,551,153 9,285,936

58,262,051

RESERVES:

Self-insurance Injuries and damages Revenue stabilization

Appropriated sinking fund Plant improvements

TOTAL LIABILITIES

10

5 9,596,661 2,205,252 2,284,698

26,372,251 113,358

40,572,220

$801,885,704

Puerto Rico Water Resources Authority

Condensed Statements of Revenues and Expenses (For Revenue Fund Purposes per Trust Indenture) Twelve Months Ending June 30 1967

June 30

June 30

1968

1969

June 30 1970

REVENUES:

Sales of electric energy Other operating revenues Total operating revenues

$93,232,606 2,085,113

$104,270,618 2,111,965

$118,883,451 2,206,614

$132,772,966 2,247,954

$95,317,719

$106,382,583 1,781,295

$121,090,065

1,420,789

2,007,086

$135,020,920 2,583,051

$96,738,508

$108,163,878

$123,097,151

$137,603,971

$13,671,019

$ 15,434,275 28,348,610 14,263,000

$ 18,948,372

Other income

Total revenues CURRENT EXPENSES:

Operation—

1,010,175 $51,532,301

937,572

$ 15,570,387 33,913,682 15,974,592 985,983

$ 58,983,457

$ 66,444,644

$ 75,984,282

$45,206,207

$ 49,180,421

$ 56,652,507

$ 61,619,689

$ 9,555,562

$ 11,166,209

$ 12,655,428

$ 14,446,737

5,710,000 207,304

6,685,000 787,908

7,342,799 1,175,105

8,412,885 1,999,072

Total sinking fund payments . . . .

$15,472,866

$ 18,639,117

$ 21,173,332

$ 24,858,694

Balance

$29,733,341

$ 30,541,304

$ 35,479,175

$ 36,760,995

$

$

Fuel

Other operating expenses

25,011,077

Maintenance

Other current expenses Total current expenses

11,840,030

38,434,344 17,748,857 852,709

Balance of revenues after current

expenses (per Trust Indenture). .

SINKING FUND PAYMENTS:

Interest account (exclusive of interest

charged to construction and reimburse ment from the Commonwealth Govern

ment of Puerto Rico)

Bond redemption account (exclusive of reimbursement from the Commonwealth

of Puerto Rico) Reserve account

TRANSFERS TO:

General reserve fund—provision for selfinsurance Renewal and replacement fund

12,393,200 5,160,000 $18,378,126

$ 18,098,507

$ 21,417,109

$ 21,437,448

$11,355,215

$ 12,442,797

$ 14,062,066

$ 15,323,547

Reserve for improvements Total transfers

1,002,087 15,164,136 5,250,886

909,838 13,671,744 3,516,925

^

824,926

1,096,720 16,662,370 3,678,358

Balance available for contributions in

lieu of taxes, etc PROVISIONS FOR CONTRIBUTIONS IN LIEU OF TAXES

13,025,787

11,423,274

10,213,261

14,551,153

$ 1,141,954

$

1,019,523

$

1,036,279

$

772,394

Transfer to sinking fund reserve account .

$

570,977

$

509,762

$

518,140

$

386,197

Balance transferred to unappropriated net revenues

$

570,977

$

509,761

$

518,139

$

386,197

Balance PROVISION FOR:

11

I

%

Units three and four of 200,000 kw each at Palo Seco Steam Electric Station. These units

have the largest generating capacity of all itnits at the existing steam plants.

Security for the Bonds

Bonds issued by the Authority under the Trust Indenture are payable from the Puerto Rico Water Resources Authority Sinking Fund. The Authority has covenanted to deposit in this fund a sufficient amount of its revenues, after expenses for main tenance and operation of its electric properties, to pay the principal of and the interest on all bonds issued as they become due, as well as to create reserves for such purposes.

The Authority has also covenanted that it will at all times fix and collect reasonable rates and charges sufficient for the payment of maintenance and oper ating expenses and bond principal and interest, and to create certain reserves. Rates must also provide

for the making of deposits required by the Trust

properties during the same period, must be not ess than 150 percent of maximum debt service ÂŽ in any succeeding fiscal year on all bonds, mc u mg the proposed issue. By supplemental indenture, to become effective only when all presently outstan mg bonds issued prior to 1965 have been retired, t is percentage wiU be reduced to 140.

The bonds and the income therefrom are, under provisions of Acts of Congress now in force, exempt from Federal and State taxation. These bonds are also legal investments for savings banks an funds in the state of New York and for savings bM s

in California and are eligible for deposit by banks m Puerto Rico to secure public funds, and by insurance companies to qualify them to do business in Puerto

Indenture to the credit of the General Reserve Fund

Rico. The bonds are rated "A" by Moody s Investors

and the Renewal and Replacement Fund, and for

Service and by Standard and Poor's.

payments in lieu of taxes to the Commonwealth and

In the credit history of Puerto Rico, its municipa i

the municipalities it serves.

In order for the Authority to issue additional bonds under the Trust Indenture, the average annual bal ance of revenues from its electric properties for the

ties, authorities, agencies and other political su divisions, there is no known record of default or e

preceding twenty-four months, after deducting the

linquency in the payment of principal of or interest on any obligation, nor has there been any forced or "managed" refunding of maturing bonds to avoid

cost of maintaining, repairing and operating these

default.

the commonwealth of PUERTO RICO General

Puerto Rico is the fourth largest cf the islands in the Caribbean area, it is about 100 miles long and 35 miles wide, having an area of 3,423 square miles and a population of 2,688,289 according to 1970 preliminary census. The topography is character ized by a fertile coastal plain rising to interior mountains which run mostly from cast to west. San

Juan, capital of Puerto Rico, lies some 1,690 miles southeast of New York, 314 hours by jet plane, and

1,000 miles southeast of Miami, 214 hours by jet plane.

Under its compact with the United States, the Commonwealth of Puerto Rico exercises virtually the same control over its internal affairs, and with

the same general procedures, as do the fifty federated States over theirs. It differs from the States primarily

in its relationship to the Federal Government. In brief, residents of Puerto Rico do not vote in the national elections and are represented in Congress

only by a Resident Commissioner who has a voice but no vote in the House of Representatives. On the other hand. Federal taxes do not apply in Puerto

was superseded in 1917 by the Organic Act or Jones

Act, which granted United States citizenship to Puerto Ricans, as well as unrestricted suffrage for local purposes. It also provided that members of both Senate and House were to be elected by the people, but the Executive and Judicial branches re

mained under control of Washington through ap pointment by the President.

No further change occurred until 1946 when the

President for the first time appointed a Puerto Rican as Governor. In 1947 the Jones Act was amended

to permit Puerto Ricans to elect their own Governor, who in turn was empowered to appoint his cabinet and members of the Supreme Court.

The next advance toward complete local govern ment occurred in 1950 when, in accordance with the

wishes of the people of Puerto Rico, the 81st Con gress enacted Public Law 600, approved July 3, 1950. This law, which is "in the nature of a com

pact," became effective upon its acceptance by the electorate of Puerto Rico. It provides that those sec tions of the Organic Act which define the political, economic and fiscal relationship between Puerto Rico and the United States shall remain in full force and shall be thereafter known as the Puerto Rican Federal

Rico except by mutual consent, such as social secu

Relations Act. It also authorized the people of

rity taxes. No Federal income tax is collected from Puerto Rican residents on income earned in Puerto

Puerto Rico to draft and approve their own con stitution. The Constitution was drafted by a freely elected constitutional convention, overwhelmingly ap

Rico and Federal excise taxes collected on exported

Puerto Rican products, such as rum and tobacco, are returned to the Commonwealth Treasury. This rela

tionship with the Federal Government is defined through the medium of the compact entered into by

proved in a special referendum, and approved by Congress and the President. It became effective upon proclamation of the Governor of Puerto Rico on July 25, 1952.

Congress and the People of Puerto Rico, and is further described hereinafter.

Government History Puerto Rico came under United States sovereignty

by the Treaty of Paris on December 10, 1898. The Congress of the United States provided for a civil government for the Island in 1900. It provided for a Governor, a Cabinet, a Senate and a Supreme

Court Judiciary, all appointed by the President of the United States; only a House of Delegates was elected by the People of Puerto Rico.

Over succeeding years strong feeling developed for a more autonomous form of government and in favor of United States citizenship. The original Act

Aerial view of site improvements for the construction of units I and 2 of 450,000 kw each for the new steam plant at Agiiirre, P. R.

1

■■lUBIWI

•51

wimwmm'.

mwewn

r N j.rr7'rTi~T^-^^

7r^T7r^"irf-V^-^'--

In the background is the Caribe Hilton Hotel with recently constructed new facilities at left. A new tower addition is now underway. In the foreground is Fort San Cristobal, one of the historic monuments, legacy of the Spanish Colonization.

The Commonwealth Government

The Constitution recognizes and assures a separa tion of powers among the executive, legislative, and judicial branches as in the Federal Constitution, and

Governmental responsibilities assumed by the Commonwealth are greater than those normally as

sumed by a State Government. Municipalities which combine both rural and urban areas are the only

as in those of the States. Both the Governor and the

local political subdivisions and are comparable to

bicameral legislature are subject to regular election every four years. The Legislature operates under standard parliamentary and legislative rules. Writs of error and appeals from judgments of the District Court of the United States for Puerto Rico may be taken to the United States Court of Appeals for the First Circuit and to the Supreme Court of the United States and writs of error and appeals from judgments

counties in scope. The only units of government

of the Supreme Court of Puerto Rico may be taken to the Supreme Court of the United States, in the same manner and under the same terms and condi tions as writs of error and appeals may be taken from other Federal and State courts.

with the right to levy ad valorem taxes are the Commonwealth Government and the municipalities.

There is, therefore, no other overlapping taxation or bonded indebtedness payable from taxes. The Commonwealth Government assumes responsibility for a number of important functions normally per formed by local governments in the Continental United States. Among these are police and fire pro

tection, education, all major street construction, and public health and welfare programs. In addition, the Commonwealth Government supervises municipal fiscal affairs to a very substantial extent.

Administration of Government

The operation of the executive branch of the gov ernment is similar to that in state governments in genera], with separate departments responsible for major activities, each headed by a secretary who as a group form the Governor's cabinet and who are

appointed by the Governor subject to Senate ap proval. In addition, Puerto Rico has made substantial

use of public corporations or agencies which are largely autonomous in their operations in providing specific services. Each is headed by an executive director or president who reports to a board of directors which in turn is appointed by the Governor.

Among the departments is the Department of State, whose Secretary becomes acting Governor or succeeds to the governorship in the absence or death of the elected Governor. Other departments include those of Treasury, Justice, Education, Public Works, Public Health, Commerce, Labor, Agriculture and Social Services. All activities of the departments are financed out of the General Fund of the Com

Among the public corporations are the Water Re sources Authority which provides essentially all elec tric power on the island, the Aqueduct and Sewer Authority which provides all water and sewage ser vices, the Ports Authority responsible for seaport and airport facilities and the Highway Authority which is charged with building all major road and highway constructions, all of whose borrowings are secured by revenues produced by the entities, or by gasoline taxes in the case of the Highway Authority.

The Government Development Bank and the Indus trial Development Company likewise are autonomous agencies which, after receiving substantial capital

contributions from the Treasury originally, have subsequently augmented their funds by borrowing on their own credit.

Among other public corporations are the Urban Renewal and Housing Corporation and the Public Buildings Authority, which provide housing facilities for persons of low and medium incomes and office space for government departments and agencies, respectively. Bonds of each are guaranteed by the Commonwealth government but they are self-sup

monwealth Treasury, in accordance with an annual budget prepared under the direction of the Governor and approved by the Legislature. The staff agencies of the Office of the Governor comprise the Bureau of the Budget, the Planning Board and the Office of

middle income housing, and from lease payments from government departments or agencies in the

Personnel.

latter case.

Medium size industricd complex on Puerto Rico's northern coast, near Arecibo, which houses a number of well-known corporations.

porting in the first instances through receipts of mortgage payments or rentals in the case of low and

Political Background

In 1938 a political party emerged in Puerto Rico which was to emphasize economic development to

improve the welfare of the people. From 1940 until the elections in November, 1968, as the Popular Democratic Party, it was in control of the govern ment of Puerto Rico, and was instrumental in estab

lishing the present Commonwealth political relation ship.

Since 1948 there have been two major thrusts in

political life in Puerto Rico towards close association with the United States and a minor and almost negli

gible one in favor of independence. The trends are illustrated in the following data on election results by parties in recent years.

1952

1956

1960

1964

1968

64.8% —

62.5% —

62.4% —

59.4% —

41.8% 10.0%

12.9%

25.0%

34.3%

34.6%

0.2%

19.0% 12.5%

3.3%

2.7%

3.0%

Governor Luis A. Ferre, a prominent and highly successful industrialist, as well as a leading philan

thropist, was the candidate in 1968 of the New Progressive Party which he organized in 1967 after leaving the Statehood Republican Party. He cam paigned on the basis of a need for change and for more effective government through new leadership.

Political status did not receive emphasis as an imme diate issue. He received 45.0% of the vote in the

recent election, compared with 41.8% of the vote received by the candidate of the Popular Democratic

Party. In the Legislature, the New Progressive Party also gained control of the House of Representatives, although the Popular Democratic Party retained con trol of the Senate, thus definitely establishing a two party system of Government.

Commonwealth

Popular Democratic Party Peoples Party Statehood

Statehood Republican Party

New Progressive Party . , .

Socialist Party

Independence Party Christian Action Party

—

—

—

3.3%

—

As a general comment, it is obvious that desire for close and permanent ties with the United States

has become an inherent ingredient.

Sun Oil induslrial complex

under construction at Yabucoa, Puerto Rico.

^

Three factors pertaining to elections in Puerto Rico are worthy of mention. There is strong public interest in government affairs and a high degree of

voter participation in elections. In the 1968 elections, 79.3% of those registered actually voted.

Second, in order to reduce pressure from special interests, Puerto Rican law limits political contribu

tions from any one person or corporation to $300 in any one election year and $100 annually in other

Men working with special equipment used for the installation of new transmission lines at Cayey, Puerto Rico.

years. Yet, recognizing the need for funds to bring issues to the attention of, and to inform the voters, each recognized political party receives from the

Commonwealth Treasury a contribution of funds to carry out its political campaign. This contribution is according to a formula based primarily on the party's percentage of votes cast in the most recent election.

And third, Puerto Rican law provides that if a

minority party receives a substantial vote, but fails to elect candidates to the Legislature, then, under certain circumstances that body is increased in size by formula to assure minority representation. The Municipal Law (Act No. 142, approved July 21, I960) also assures minority representation in the Municipal Assemblies since at least three members of each of these bodies have to be elected from the

minority parties.

1967 Plebiscite

In 1962 the Legislature of Puerto Rico petitioned

In response to the petition, the Congress ap proved a bill in 1964 providing for the establishment of a United States-Puerto Rico commission to study all the factors involved. The membership of this commission consisted of three persons appointed by the President of the United States, two each selected

by the Senate and the House of Representatives, and six appointed by the Governor of Puerto Rico. The Commission concluded that the people of Puerto Rico should be consulted with regard to the status they preferred and, in December, 1966, the Puerto Rican Legislature passed an act providing for the holding of the plebiscite.

This plebiscite, held July 23, 1967, strongly re affirmed the overwhelming desire of the Puerto Rican

people to maintain permanent and close ties with the United States. Of the over 700,000 ballots cast (66.3 percent of all registered votes) 99.4 percent were for either Commonwealth or Statehood and only 0.6 percent for Independence.

an expression of preference could be demonstrated

Political stability, one of the prime requisites of a sound, attractive investment climate, is outstandingly demonstrated in Puerto Rico.Only a declining minor

for either a continuation of the existing common

ity party favors independence. Both major parties

wealth relationship with the United States, or the attainment of Federated Statehood in the United States, or the establishment of Puerto Rico as an

hold maintenance of permanent ties with the United States as a basic principle, and differ only as to the form which that future political relationship should

independent country.

take.

the Congress of the United States requesting a plebiscite by the voters of Puerto Rico through which

Expansion and Diversification of the Economy of Puerto Rico

Economic growth in Puerto Rico since 1950 has been very rapid. Gross product of the Common wealth has increased more than 5 times over its 1950 level and has more than doubled during the past nine

years ($4,093 million in 1969 vs $1,681 million in 1960). In the year ended June 30, 1969 gross

the manufacture of sugar products accounted for 35% of manufacturing income. By 1966-67 about 4.5% of manufacturing income resulted from this industry. Manufacturing income is now generally derived from the production of new types of manu factured products, principally for shipment to the United States. Such shipments amounted to only $33 million in 1949-50. By 1968-69 they had

product totalled an estimated $4,093 million, repre

reached a total of about $1,092 million.

senting an increase of 9.4% over the prior year.

These new products cover a wide range such as apparel, petroleum derivatives and electronic prod ucts. Large, heavily capitalized manufacturing oper ations have shown a significant increase in recent

Net income of the economy has increased from a level of $614 million in 1950 to $3,403 million in 1969. Income, measured in current prices, has shown

an average increase during the last five years of about 10.3% compounded annually and in the year ended June 30, 1969 it increased by 10.6% over the

previous year. Per capita net income is now $1,234 compared to $279 in 1950.

The Commonwealth Government's program of in dustrialization has aided the economy to shift from

years (speeially during the last two fiscal years) as compared to labor intensive operations which were promoted during the early part of the industrializa tion program. Some of the more important of the larger operations promoted during last year alone include the Union Carbide Corporation, which is in the process of making expansion totaling approxi

one principally agricultural to one much better diver

mately $225,000,000; PPG Industries with a poten tial investment of $65,000,000; Fibers International

sified between industry and agriculture. Concurrently with the expansion in net agricultural income from

production of nylon fibers, which will serve as raw

with a planned expansion of $41,000,000 for the

$149 million in 1949-50 to about $175 million in

material in the attraction of new textile and apparel

1968-69, manufacturing income increased from $89 million to $908 million in 1968-69, substantially sur passing agriculture as a source of income.

industries; Air Products & Chemicals, $9,000,000; AIRCO Ponce, Inc., $18,000,000; and other large

Puerto Rican manufacturing has been increasingly diversified during the last two decades. In 1939-40

Squibb Beech-Nut, Inc., Southern Screw Company,

operations, such as: Bristol Alpha Corporation, Shulte & DiekofI (a German concern), Hercor

The Toil Vaca Project is financed

hy the Commonwealth of Puerto Rico and includes the construction

of a dam. ttinnel and waterways at the South Coast section of the island.

....^

—-dSei

Panoramic view of modern highway in the western part of the island. Here is the entrance ■

to Mayagiiez. one of the cities that has been most developed during past several years.

*-r "•

Wlffi r ^/i iv Mm

W^Mm

Hp'

Chemical Corporation, Pennyrich International and many others that form part of the 493 projects pro moted during last fiscal year.

The petrochemical industry is steadily becoming the most important industrial sector. Its increasing importance to the economy of the Commonwealth is signaled by its recent developments and its rapid growth. From an investment of $96,328,000 in 1960 with two refineries (Commonwealth Oil Refin

with respect to import quotas for the crude oil and other feedstocks needed by this industry on the island.

Food, pharmaceutical and textile and apparel in

dustries have also been of significant importance in industrial development. Three rice mills and large flour and feed mills supply an important share of Puerto Rico requirements in their field. Four large tuna canneries are now in operation and with an

ing Co. Inc., and Caribbean Gulf Refinery) the

additional one under construction the island has be

industry has rapidly developed in recent years with growing diversification of primary and secon dary products that includes gasoline, naphtha and a wide spectrum of aromatic products and olefins.

come one of the leading suppliers of canned fish in

Expansion in this sector is continuing with the in coming of Sun Oil Company which has announced its intention to invest up to $120,000,000 through

1971, the expansion of the operations of Union Car bide Caribe up to $225,000,000 in investment, the

the United States market.

In the pharmaceutical and chemical industry sec tor Puerto Rico is rapidly becoming a manufacturing center. Bristol Alpha Corporation, Merck & Com pany, Pharmaseal Laboratories, Squibb, Beech-Nut, Inc., Abbott Laboratories, Eli Lilly & Co., Parke, Davis & Co., and others manufacture pharmaceutical products in Puerto Rico principally for export to

entrance of PPG Industries with three plants to pro

outside markets.

duce caustic soda, ethylene glycols and vinyl chloride

The textile and apparel industry has continued to expand and is expected to continue to grow with the expansion of Fibers International, Inc.. which is a

with an expected investment of $65,000,000 and further expansion by Commonwealth Oil Refining Co. Inc., and Phillips Puerto Rico Core. It is ex pected that the next few years will see an expansion

source of raw material in the form of nylon 66 fibers

in this sector that will bring the total investment up

Many of the plants encouraged by the Economic Development Administration are branches or sub sidiaries set up by such parent firms as General

to $1,058 millions, thus making this sector the larg

est part of the industrialization program of the island.

To date no major difficulties have been encountered

and nylon carpet yarns.

Electric Co., American Can Co.. Consolidated Cigar,

Phelps Dodge, Sun Oil Company, Daystrom, Car

thousand to 6.1 per thousand at present, which is

borundum, Sprague Electric Co., Van Camp Sea Food, General Foods Corporation, Van Raalte, Hooker Chemical Corporation, PPG Industries Inc., B.V.D., Bristol-Myers Co., International Shoe,

now about the same as the U. S. average. The birth rate has declined from 39.6 per thousand in 1950 to

24.8 per thousand in 1969. The people are better

R.C.A. Corp., Westinghouse Electric Corp., Merck,

educated, with literacy increased from 75% to about 86% in 1967. Institutions of higher learning have

Abbott Laboratories, Eli Lilly & Co., Squibb Beech-

also expanded rapidly. University and college enroll

Nut, Inc., Libby McNeill & Libby, Del Monte

ment which was only 13,000 in 1950, now has

Corp. and many others.

48,000 students.

Underlying Puerto Rico's growing and changing economy there has been a steady expansion in in

It is significant that the Commonwealth Govern ment has in the last three years directed approxi mately 47% of its expenditures to education and

vestment. Average gross fixed domestic investment

during the last five consecutive fiscal years, 1965-69,

health.

ran at a rate of 26% of gross product. It has in creased from $112 million in 1950 to $1,090 million in 1969. Inflowing long-term U. S. capital rose from

provide a climate inducive to further economic de velopment and growth. Thus it is expected that in

$31 million in postwar 1947 to an estimated $630

the years ahead a sustained rate of economic growth can be maintained. Present projections indicate

million in 1969.

The Puerto Rican people have benefitted greatly from the economic expansion achieved since 1950.

Life expectancy has increased from 61 years to 70

years and the death rate has declined from 10.5 per

In Hatn Rey. mctropoUlun San Juan, a nen' financial center is developing with the construction of several bank headquarters huildings.

The Commonwealth Government will continue to

that gross product in terms of current prices should reach $7,460 million in 1975. This will mean a per sonal income per capita of approximately $1,855.

PUERTO RICO WATER RESOURCES AUTHORITY San Juan, Puerto Rico

The Community We Serve Approximate Times Increased or

(Decreased) 1940

1950

1970"♦

Over 1950

An Expanding Economy: Gross Product—$ Millions Net Income—$ Millions

Personal Income Per Family—$

.

.

.

287

755

4,607

6.1

225

614

3,759

6.1

611

1,500

5,848

3.9

73

319

2,548

8.0

17

51

553

10.8

312

459

4,066

8.9

2

28

250

8.9

Banks:

Debits—$ Millions

Private Savings Accounts—$ Millions .

.

.

Assessed Value of Taxable Property— $ Millions

Income Tax Collections—$ Millions .

.

.

.

A More Balanced Economic Life:

Percentage Points

Per cent of Net Income from:

Change

Manufacturing

12

14.5

25.0

Agriculture

31

24.3

4.8

Commonwealth and Municipal Government,

10.5

(19.5)

8

11.4

16.2

4.8

Trade

12

16.6

17.6

1.0

Other

37

33.2

36.4

3.2

Per Cent of Exports from: Exports by New Factories*

14.0

74.5

Sugar (Raw and Refined)

62

51.1

3.3

Other

38

34.9

22.2

—

Per Cent

A Healthier, Better Educated Population: Population

60.5

(47.8) (12.7) Change

1,869,000

2,206,414

2,688,289

Birth Rate—Per Thousand

39.0

39.6

24.9

(37.1)

Death Rate—Per Thousand

18.4

10.5

6.5

(38.1)

46

61

70

14.8

286,000

431,000

672,000

55.9

5,000

13,000

56,000

330.8

Life Expectancy—Years Public Day School Enrollment University and College Enrollment

Promoted by the Economic Development Administration.

Does not include exports of other new factories.

Source: Puerto Rico Planning Board.

Preliminary.

21.8

^^AtNr

ftSTRA

A5PERA

1311 Ponce de Leon Avenue, San Juan, Puerto Rico 00908 / 45 Wall Street. New York, N. Y. 10005