Puerto Rico Water Resources Authority (feb. 1962)

February 1962

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l?vCOMMONWEALTH OF PUERTO RICO

Government Development Bank for Puerto Rico SAN JUAN. PUERTO RICO

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COMMONWEALTH OF PUERTO RICO

Puerto Rico Water Resources Authority GOVERNING BOARD

Chairman: Hon. Luis Munoz Marin, Governor of the Commonwealth of Puerto Rico Vice Chairman: Hon. Francisco Lizardi, Secretary of Public Works

Member:Hon. Luis Rivera Santos, Secretary of Agriculture

OFFICERS

Executive Director: Rafael V. Urrutia

Asst. Executive Director — Programs and Plans: Victor M. Catalog Asst. Executive Director — Power Operations: Rafael R. Ramirez Asst. Executive Director — Finance: Eduardo Lube

Asst. Executive Director — Industrial and Personnel Relations: Fernando Torrent General Counsel: Jose Vila Ruiz

General Manager of Service and Supply: Felix Cordova Diaz Director of Power Engineering and Construction: Waldemiro Velez

Director of Production and Transmission: Carlos Sabater Director of Distribution and Sales: Julio Negroni Director of Personnel: Juan F. Doval

Chief Engineer:Pedro Colon Pagan Controller: Jose Ismael Diaz Treasurer: Adolfo Criscuolo

General Manager of Irrigation Service: Harold Toro Director of Public Relations: Guillermo Navarro Fuentes Director of Purchasing: Javier Cuevas Benitez Safety Officer: Rafael D. Chervoni

TRUSTEE

First National City Bank, New York

CONSULTING ENGINEERS

Jackson & Moreland,Inc.

AUDITORS

Arthur Andersen & Co.

BOND COUNSEL

Mitchell, Pershing, Shetterly & Mitchell

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Rafael V. Urrutia, Executive Director

PUERTO RICO 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 pub lic service corporation and instrumentality of the Government of the Common wealth of Puerto Rico. The Authority is governed by a Board composed of the Governor of Puerto Rico, the Secretary of Public Works, and the Secretary of Agriculture. The Board appoints an Executive Director who, in turn, appoints all other officers and employees and is responsible for the management and operation of the Authority.

The origin of the Authority goes back to the operation of two government agencies which began 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 Water Resources of Puerto Rico, created in 1927. In 1941,

the Authority was established by law to replace the Utilization of Water Re sources and ensure a growth in the supply of electricity which would be ade quate for the future needs of Puerto Rico's economic 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, the properties of the Porto Rico Railway, Light and Power Company being acquired for $10,500,000 and those of the

Mayaguez Light, Power and Ice Company for $1,700,000. At a later date, the hydroelectric plants of various irrigation services were integrated into the Author ity's system.

When the Authority began operations in 1941, the Island's economy was pri marily agricultural and heavily dependent on a single crop — sugar. In the latter part of that same decade, the industrialization program for the Island was intensified through the well known "Operation Bootstrap." By 1956, for the first time in Puerto

Rico's history, net income from manufacturing surpassed that from agriculture.

Today over six hundred and ninety new factories, established through the economic development program, are in operation with a total direct employment of over 54,000. As expected, the rapid change in the basic character of the economy created a consistent and rapid rise in the demand for energy. However, the Authority

through long range planning has always been able to keep abreast of the Island's needs for electric power.

PUERTO

RICO

WATER

RESOURCES

AUTHORITY

ELECTRIC SYSTEM OECCMBCR

31, 1961

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SALINAS

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4.640 A*

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O HYOHO-ELECTRIC PLANTS

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3SKV ELECTRIC TRANSMISSION LINES

SAKV electric transmission lines (Lititr Cmlruttian) EXISTING 115 KV ELECTRIC TRANSMISSION LINES ■ 115 KV ELECTRIC TRANSMISSION LINES (Undtf Contlrucl

A INTERCONNECTING SUBSTATIONS

RESERVOIRS

A SUBSTATIONS

The growth of the Authority during this period has been impressive, shown as of June 30, as follows: J946

1951

1956

1961

Net Utility Plant .

. $34,479,626

$80,253,138

$145,838,595

$286,428,099

Electric Revenues

5,764,058

13,005,874

25,215,538

45,303,522

124,959

185,090

314,853

435,019

Number of Customers

In the twelve months ending December 1961, 2,025,471,267 Kwh of energy were sold to more than 447,188 customers producing electric revenues of $48,239,264. In the past five years the Kwh sales of the Authority increased each year at the average rate of 16 percent compounded. Leaving aside the reces sion year of 1958-59, the rate has been 17.4 percent. The 1960-61 recession barely affected Puerto Rico or the Authority. Generation requirements have risen more than twelvefold since 1941. From its inception the Authority has had to build new hydro and thermo-electric plants to keep up with and anticipate the mounting demand for electric power. New generating capacity has been added almost every year following acquisition of the two private utilities in 1944. Since then total name plate rating of the Authority's generating plant has risen from 64,440 Kw in 1944 to the present capacity of 656,420 Kw. Annual capital construction programs in recent years have reached as high as $31 million.

The capital construction program for 1961-62 is estimated at $25,925,000. It includes completion of a third 82,500 Kw unit, already undergoing fi nal testing, at the South Coast Steam Plant near Ponce. Another important project is to continue construction of "BONUS," the 16,500 Kw nuclear power plant being built on the west coast. This program also includes another 82,500 Kw generator now under con struction and scheduled for operation in August 1963; rural electrification projects.

general transmission and distribution facilities, the acquisition of land and the construction of buildings, and miscellaneous items. When current projects are completed, total generating capacity will be in excess of 755,000 Kw. The Authority is now exceeded in size only by the City of Los Angeles Depart ment of Water and Power among all of the publicly owned integrated distributors of electric energy in the United States, according to the following tabulation as of June 30, 1961:

Net Plant Electric Revenues . .

Number of Customers.

City Cily of Los Angeles Department of Water and Power

Puerto Rico Rico Puerto Water Resources Resources

$618,956,671 123,671,564 945,318

$286,428,099 45,303,522 435,019

Authority A uthority

City of Seattie Department of Lighting

$214,921,528 37,979,289 234,648

PRESENT ELECTRIC SYSTEM

Total installed generating capacity of the Authority at the end of December 1961 had a name plate rating of 656,420 Kw and maximum continuous capacity of 702,280 Kw. The physical plant presently consists of twenty-two generating sta tions, of which eighteen are hydroelectric and four are thermal-electric generating plants. Thermal-electric facilities now supply approximately 89 percent of electric energy generated. Fuel oil is delivered directly by pipelines from the Caribbean Refining Co. on the north coast and from the Commonwealth Oil Refining Co. on the south coast to the plants in these areas. The Authority's four thermal-electric generating stations have a total installed name plate rating of 548,500 Kw. The Palo Seco Steam Plant, located near San Juan, was placed in service in I960 and

General Office Building, San Juan, Puerto Rico.

at present has two 82,500 Kw steam-electric units. It is designed for an ultimate capacity of 1,000,000 Kw.

The South Coast Steam Plant, near the city of Ponce, has two 44,000 Kw

steam-electric units. One of the outstanding features of this plant is that it can

bum either low cost refinery pitch or Bunker C fuel oil. A third new unit of 82,500 Kw is undergoing final tests and will be in operation in March 1962.

The San Juan Steam Plant has an installed capacity of 168,000 Kw in four 20,000 Kw and two 44,000 Kw steam-electric units.

The Mayaguez Steam Plant, the oldest of the four plants in service, was recently

equipped with two gas turbine generators with a rated capacity of 20,000 Kw each. The main purpose of the gas turbines is to take care of peak loads for short periods in the daytime. A 5,000 Kw steam-electric unit is held in cold standby.

HYDROELECTRIC STATIONS

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There are 18 hydroelectric plants with a total installed capacity of 107,920 Kw. Four hydroelectric plants operate on run of river flows, and the remaining four

teen have reservoirs which permit regulation of plant output by collecting and

storing water inflows during the rainy season for utilization during the dry season.

Eleven of the hydroelectric plants are non-attended and fully automatic, being

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operated by remote control.

NUCLEAR POWER PLANT

-A. A corner of the Monacillo Trans mission

Center

control

room.

A nuclear power plant utilizing a new and advanced type of boiling water reactor and nuclear superheater, with a rated capacity of 16,500 Kw is being constructed on the western tip of Puerto Rico under the terms of a contract between the AuthorLoad Dispatchers Training Class, Monacillo Transmission Center.

An addition to the powerhouse of the South Coast Steam Plant to house a third unit, 82,500 Kw.

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GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1940 Sales r

(Thousands

Fiscal Year

(June 30)

(Million

Customers

Maximum Peak Load

Average

Kilowatt

per

Revenue

Load

Hours per

(Kw)

(Kw)

Kilowatt Hour

Customer

Revenue per

of Dollars)

Kwh)

(End of Period)

1940-41. . .

$ 3,610

139.0

100,492

18,000

9,000

1,383

$.0260

$35.93

1945-46. . .

5,764

258.6

124,959

63,000

39,000

2,069

.0223

46.13

109,000 122,000 140,000 155,000 178,000 210,000 249,000 272,000 314,000 355,000 398,000 464,000 Clause.

69,000 77,000 87,000 97,000 109,000 129,000 153,000 181,000 198,000 231,000 261,000 306,000

2,638 2,897 2,955

.0266 .0263 .0258

70.27 76.28

3,067

.0255

3,162 2,956 3,184 3,578 3,687 4,080 4,484 5,025

.0255 .0271 .0266 .0262 .0252 .0243 .0239 .0232

78.11 80.79

488.2 185,090 13,006 14,880 565.1 195,061 625.3 211,567 16,115 17,825 699.9 228,205 19,799 774.9 245,058 25,216 930.8 314,853 28,693 1,078.4 338,685 33,973 363,032 1,298.8 35,781 1,421.6 385,592 40,441 .

1,667.4 408,671 45,304 .

1,892.4 435,019 51,951 2,242.7 458,618 ' Includes amount recovered through Fuel Oil Adjustment

1950-51 . . .

1951-52. .

1952-53* .

1953-54* .

1954-55* .

1955-56* .

1956-57* .

1957-58* .

1958-59* .

1959-60* .

1960-61* .

1961-62**.

. . . . . . .

Customer

'Estimate including Fuel Oil Adjustment Clause.

ity and the Atomic Energy Commission. The Authority will finance the cost of the plant site and the conventional generating components at an estimated cost of $3,750,000. The AEC will invest about $12,200,000 in the construction of the

nuclear reactor. It is estimated that this plant will be in operation early in 1963.

This project will give the Authority the necessary experience to undertake large

scale generation by means of nuclear reactors when such generation becomes economically feasible.

TRANSMISSION AND DISTRIBUTION SYSTEMS

The Authority's transmission system consists of 1,280 circuit miles of 115 Kv and 38 Kv lines, controlled and sectionalized at 92 transmission substations, with a

total name plate capacity of 1,158,750 Kva located at suitable points throughout the system to insure stability of service and provide an appropriate islandwide net work from which power is supplied to serve the entire Island.

Distribution facilities include 10,813 structure miles of lines and 170 substations

owned by the Authority with a capacity of 482,361 Kva, which, supplied from the transmission network, convert the electric power for distribution at 4,160 volts

through distribution feeders which traverse 75 cities and towns and most of the rural area. In addition, there are 101 privately owned distribution substations with a total

capacity of 180,460 Kva to serve industrial customers making a total installed capacity of 662,821 Kva.

RURAL electrification

Through successive amendments to an original loan contract for $6.4 million, entered into in 1952 between the Authority and the Rural Electrification Admin

istration of the United States, the Authority has borrowed to date $54,325,000 at 2% under a loan contract now totaling $58,450,000. These funds were loaned

by REA for the construction of generation, transmission and distribution facilities

76.17

80.08 84.72 93.58 92.79 98.96 107.34 116.40

mm

Panoramic view of Palo Seco 165,000 Kw steam-electric sta tion, San Juan.

to serve rural customers. Nearly 69,000 rural families are now being served under this program.

By law, the Commonwealth Government contributes to the Authority the annual amounts required to guarantee that the Authority recovers the complete cost of service to customers served under the REA program.

FINANCING THE PROGRAM

The Authority has broad powers under the legislation by which it was created, including the power to borrow money and issue revenue bonds for any of its corporate purposes and to secure the payment of such bonds under a Trust Inden ture. It has full authority to set and collect adequate rates and other charges for the use of its facilities, as well as having complete control and supervision over

its properties and activities. Properties may be acquired by the Authority by any lawful means, including the power of eminent domain.

For many years the Authority has pursued a policy of obtaining short-term bank loans for the purpose of constructing facilities under its Capital Improvement Program; from time to time, issues of revenue 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. Bonds outstanding, including the REA issues, totaled $245,406,000 as of January 1, 1962.

MILLIONS OF DOLLARS

PUERTO RICO WATER RESOURCES AUTHORITY

REVENUES FROM SALES OF ELECTRICITY

iS US FISCAL

1947

1948

1949

1950

1951

1952

1953

1954

1955

1956

YEARS ^ 2 Month Acfuol, 7 Month Estimoted Including Fuel Oil Adjustment Clause.

1957

1958

1959

1960

1961

1962*

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

In addition, a substantial amount of the Capital Improvement Program has been financed directly from revenues of the Authority. In the period from May 1, 1947 to December 31, 1961, a total of $304,816,686 was invested in capital improvements; of this amount $239,274,703 had been provided from bank bor rowings and the proceeds of bond issues, and $65,541,983 or about 21.5 percent, had come mainly from net revenues of and contributions to the Authority. On December 31, 1961, total assets amounted to $347,822,766, operating and appro priated reserves were $16,888,413, net contributed capital and unappropriated earnings were $60,183,132, and outstanding debt was $256,278,000.

Total revenues for the twelve months ended December 31, 1961 were $50,076,668.

Current expenses were $26,986,034 leaving $23,090,634 to meet debt service

requirements. The maximum debt service for any future year on outstanding issues

The BONUS nuclear-electric station one year after construc

tion started. This plant is sched

uled for completion in the early part of 1963.

PUERTO RICO WATER RESOURCES AUTHORITY

CONDENSED BALANCE SHEET

AS OF DECEMBER 31, 1961

ASSETS

GROSS UTILITY PLANT Less provision for accumulated depreciation

$338,060,693 44,752,146

NET UTILITY PLANT

$293,308,547

OTHER PHYSICAL PROPERTY

1,152,393

BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS

18,051,242

CURRENT ASSETS:

Funds and working advances

$ 11,584,088

Accounts receivable â&#x20AC;&#x201D; Less Reserve for uncollectible accounts

Materials and supplies Prepayments, special deposits and other

8,482,785 8,200,525 937,491

29,204,889

5,615,704 489,991

6,105,695

DEFERRED DEBITS:

Debt discount and expense in process of amortization

. . .

Other

$347,822,766

TOTAL ASSETS

LIABILITIES

CONTRIBUTED CAPITAL

$ 31,694,531

UNAPPROPRIATED NET REVENUES

28,488,601

LONG-TERM DEBT (Including notes payable pending long-term financing)

256,278,000

CURRENT LIABILITIES:

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

$

2,055,773 1,874,009 4,110,328 2,753,534 3,105,494

DEFERRED CREDITS

13,899,138 574,083

RESERVES:

Self-insurance Hydro-production equalization Injuries and damages

Revenue stabilization Appropriated sinking fund TOTAL LIABILITIES

$

2,941,491 721,259 338,796

886,649 12,000,218

16,888,413 $347,822,766

PUERTO RICO WATER RESOURCES AUTHORITY

CONDENSED STATEMENT OF REVENUES AND EXPENSES (For Revenue Fund Purposes per Trust Indenture)

TWELVE MONTHS ENDING June 30 1958

REVENUES:

Sales of electric energy Other operating revenue

June 30 1961

June 30 1960

June 30 1959

December 31 1961

707,694

$35,780,765 811,338

$40,440,678 994,844

$45,303,522 1,110,660

$48,239,264 1,229,813

$34,680,975

$36,592,103

$41,435,522

$46,414,182

$49,469,077

659,622

363,432

638,016

731,477

607,591

$35,340,597

$36,955,535

$42,073,538

$47,145,659

$50,076,668

$ 6,729,048 9,563,725 4,218,402 414,690

$ 5,851,898

$ 6,364,024

$ 6,885,447

10,755,756

12,135,940

13,381,840

4,165,602 351,265

3,913,749 423,207

4,495,076 511,245

$ 7,368,875 13,696,130 5,352,817 568,212

$20,925,865

$21,124,521

$22,836,920

$25,273,608

$26,986,034

$14,414,732

$15,831,014

$19,236,618

$21,872,051

$23,090,634

$ 3,535,363

$ 4,764,979

$ 5,226,952

$ 6,024,656

$ 6,506,855

1,898,402 509,893

2,101,488 651,812

2,549,700 856,675

2,930,621 1,003,767

3,149,302 1,072,339

Total sinking fund payments. . .

$ 5,943,658

$ 7,518,279

$ 8,633,327

$ 9,959,044

$10,728,496

Balance

$ 8,471,074

$ 8,312,735

$10,603,291

$11,913,007

$12,362,138

$

$

$

Total operating revenues . . . .

$33,973,281

Other income Total revenues

CURRENT EXPENSES:

Operation— Fuel

Other operating expenses Maintenance

Other current expenses Total current expenses Balance of revenues after current

expenses (per Trust Indenture) SINKING FUND PAYMENTS:

Interest account (exclusive of interest charged to construction and reim bursement from the Commonwealth

Government of Puerto Rico) . . .

Bond redemption account (exclusive of reimbursement from the Common

wealth Government of Puerto Rico) Reserve account

TRANSFERS TO:

General reserve fund — provision for self-insurance

Renewal and replacement fund Total transfers

328,783 3,921,141

367,316 4,399,653

397,119 4,831,232

$

479,696 6,008,704

$

509,880 6,431,741

$ 4,249,924

$ 4,766,969

$ 5,228,351

$ 6,488,400

$ 6,941,621

$ 4,221,150

$ 3,545,766

$ 5,374,940

$ 5,424,607

$ 5,420,517

3,721,366

3,919,491

4,429,208

4,957,439

5,277,229

Balance available for contribution

in lieu of taxes, etc PROVISION FOR CONTRIBUTION IN LIEU OF TAXES Balance

$

499,784 ($

$

249,892

373,725) $

945,732

$

467,168

$

143,288

$

472,866

$

233,584

$

71,644

PROVISION FOR:

Transfer to sinking fund reserve account Revenue stabilization Total

—

—

$

373,725

—

—

—

$

249,892

$

373,725

$

472,866

$

233,584

$

71,644

$

249,892

$

—

$

472,866

$

233,584

$

71,644

Balance transferred to unappropri ated net revenues

( )Denotes credit.

BONDED DEBT NOW OUTSTANDING GENERAL MARKET ISSUES Amount

Coupon by Maturity Range Original Issue

Dated

$50,000,000

Jan. 1, 1947

25,000,000 21,000,000

12,500,000

22,000,000

July 1, 1950 July 1, 1953

Jan. 1, 1955

Price

Jan. 1, 1962

Jan. 1, 1950

104%

$ 31,510,000

10,819,000 10,425,000

July 1, 1953

104%

21,244,000

1,000,000 2,020,000 1,555,000 15,825,000

July 1, 1958

105%

20,400,000

3.00% 3.25% 33/8%

765,000 2,490,000 8,850,000

Jan. 1, 1960

103%

12,105,000

1, 1962 3.00% 1, 1965 3.25% 1, 1970 3.40% 1, 1975 3.50% 1, 1981 3.60% 1, 1989 3.70% 1, 1993 3.75%

75,000 245,000 485,000 560,000 975,000 I,845,000 17,555,000

July 1, 1961

104%

21,740,000

1963-Jan. 1, 1965 5.00% 1966-Jan. 1, 1969 3.50% 1970-Jan. 1, 1975 3.75% 1976-Jan. 1, 1979 3.90% 1980-Jan. 1, 1985 4.00% 1986-Jan. 1, 1996 4.10%

505,000 760,000 1,410,000 1,150,000 2,120,000 18,585,000

Jan. 1, 1965

104%

24,530,000

1963-Jan. 1, 1966 1967-Jan. 1, 1969 1970-Jan. 1, 1983 1984-Jan. 1, 1990 1991-Jan. 1, 1996

5.00% 3.75% 4.00% 4.10% 4.20%

515,000 450,000 3,030,000 2,320,000 13,470,000

July 1, 1965

104%

19,785,000

1, 1965 1, 1977 1, 1983 1, 1989 1, 1995 1, 1997

5.00% 4.00% 4.10%

4.20% 4.30% 43/8%

350,000 1,985,000 1,460,000 1,860,000 2,415,000 II,650,000

July 1, 1966

104%

19,720,000

1963-Jan. 1, 1967 Jan. 1 1968-Jan. 1, 1972 Jan. 1 1973-Jan. 1, 1998

5.00% 3.75% 4.00%

675,000 850,000 20,475,000

Jan. 1, 1967

104%

22,000,000

From

Int. Rate

Amount

2.75%

2.50% 2.70%

$ 6,065,000 16,087,000 9,358,000

July 1, 1963-July 1, 1980 2.75% Jan. 1, 1981-July 1, 1984 2.80% July 1, 1962-July Jan. 1, 1971-July Jan. 1, 1981-July Jan. 1, 1984-July

1 1 1 1 1 1

Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1 Jan. 1

20,000,000

Jan. 1, 1959

Jan. 1

Jan. 1 Jan. 1 Jan. 1 Jan. 1

20,000,000

22,000,000

Jan. 1, 1960

Jan. 1, 1961

1, 1970 4.30% 1, 1980 4.60% 1, 1983 3.75% 1, 1988 4.75%

July 1, 1962-July 1, 1969 Jan. 1, 1970-July 1, 1982 Jan. 1, 1983-July 1, 1990

July 1, 1956

Jan. 1, 1958

To

July 1, 1962-July 1, 1965 Jan. 1, 1966-July 1, 1973 Jan. 1, 1974-July 1, 1977

July July July July July July 25,000,000

Outstanding

First Call

July 1963-July 1966-July 1971-July 1976-July 1982-July 1990-July

1963-Jan. 1966-Jan. 1978-Jan. 1984-Jan. 1990-Jan. Jan. 1 1996-Jan. Jan. Jan. Jan. Jan. Jan.

1 1 1 1 1

Jan. 1

Date

Total General Market Issues

^93,034,000

RURAL ELECTRIFICATION ADMINISTRATION ISSUES S 1,000,000 2,000,000 2,000,000 2,000,000 2,400,000 2,500,000 9,200,000 2,800,000 2,400,000 2,500,000 17,200,000 4,250,000 4,075,000

mo

July July July July July July July July July July

1, 1952 1, 1953 1, 1954 1, 1955 1, 1956 1, 1957 1, 1957 1, 1958 1, 1958 1, 1959

Jan. 1, 1960 July 1, 1960

July 1, 1961

1, 1962- -July 1, 1962- -July 1, 1962- -July 1, 1962- -July 1, 1962- -July 1, 1962- -July 1, 1962- -July 1, 1962- -July 1, 1962- -July 1, 1962- -July 1, 1962- -Jan. Jan. 1, 1963- -July Jan. 1, 1964- -July

July July July July July July July July July July July

1, 1987 1, 1988 1, 1989 1, 1990 1, 1991 1, 1992 1, 1992 1, 1993 1, 1993 1, 1994 1, 1995 1, 1995 1, 1996

2.00%

Any t me

2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

100%

$

828,000 1,704,000 1,752,000 1,800,000 2,218,000 2,365,000 8,695,000 2,695,000 2,320,000 2,470,000 17,200,000 4,250,000 4,075,000

2.00%

Total R. E. A. Issues

$ 52,372,000

Total Outstanding

$245,406,000

was $11,972,443, indicating a coverage of 1.94 times on present debt. Payments to the Commonwealth and municipal governments in lieu of taxes amounted to $4,957,439 in the fiscal year 1960-61. During the rapid expansion of facilities and improvement of service over the past decade, the Authority's rates have not been raised. Constant increases in demand have consistently resulted in yearly growth in revenues and in substantial reserves, adequate to meet the Authority's operating expenses and contractual obligations.

In March, 1962, the Authority will issue $12,500,000 par value Electric Revenue Bonds, from which $10,500,000 of current bank borrowings will be retired and about $2,000,000 will be made available for new construction.

LOOKING AHEAD

Continuous studies of power needs, constantly reviewed and revised by the Authority and its consulting engineers, now indicate that peak demand on the system will increase from 464,000 Kw in 1961-62 to 543,000 Kw in 1962-63, 618,000 Kw in 1963-64 and 702,000 Kw in 1964-65. It is expected that over

20,000 new customers will be added yearly. To meet this demand, the projected name plate rating generating capacity of the Authority will be raised to 837,920 Kw by 1965.

During the period from July 1, 1961 through June 30, 1965, it is anticipated that the Authority will invest $113,400,000 in further capital improvements. Of this amount, the sale of bonds will provide some $68,000,000. About $38,400,000 or 34%, will be derived principally from revenues of the Authority, compared with an average of 21.5% accrued from earnings during the last fifteen years. The remainder of $7,000,000 will be available from previous bond issues.

The above four-year program compares with capital expenditures actually made during the past fourteen years, which are distributed as follows: Steam Production Plant

Hydraulic Production Plant Gas Production Plant

Transmission Plant

. . . .

Distribution Plant .

Other Facilities

$111,020,418 35,909,928 8,126,551 41,757,149 81,290,312 26,712,328

| i

$304,816,686

SECURITY FOR THE BONDS

Bonds issued by the Authority under the Trust Indenture are payable from the Puerto Rico Water Resources Authority Sinking Fund, into which Fund the Authority has covenanted to deposit a sufiBcient amount of its revenues, after expenses for maintenance 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 further covenants that it will at all times fix and collect reasonable rates and charges sufficient for the payment of maintenance and operating expenses

and bond principal and interest, and to create certain reserves. In addition the rates must provide for the making of deposits required by the Trust Indenture to the credit of the General Reserve Fund and the Renewal and Replacement Fund, and for pay ments in lieu of taxes to the Commonwealth and the municipalities it serves.

Puerto Rico's steady industrial growth demands additional elec trification facilities. Above, the new Bayamon transmission cen ter. 12 miles from San Juan.

PUERTO RICO WATER RESOURCES AUTHORITY

TOTAL REVENUES, BALANCE AVAILABLE DEBT SERVICING AND DEBT SERVICE REQUIREMENTS DOLLARS

55.000,000 -

50,000.000

45,000,000

40,000,000

LEGEND

â&#x2013; i

TOTAL REVENUES

bOOOi

BALANCE AFTER CURRENT EXPENSES

35,000,000

30,000,000

I.;.;.;.;.:.;.:.;!

DEBT SERVICE REQUIREMENT

25,000,000

20,000,000

15,000,000

10,000,000

5,000,000

FISCAL

YEARS

^'53

1954

1955

1956

1957

1958

*5 Month Actual, 7 Month Estimated Including Fuel Oil Adjustment Clause.

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

In order to issue additional bonds under the Trust Indenture, the Authority must demonstrate that the average annual net revenues of its electric properties for the preceding twenty-four months, after deducting the cost of maintaining, repairing and operating such properties during such period, have been not less than 150 percent of maximum debt service payable in any succeeding fiscal year on all bonds including the proposed issue.

The Bonds and income therefrom are, under provisions of Acts of Congress now in force, exempt from Federal and State income taxation. Such Bonds are also legal investments for Savings Banks and Trust Funds in the State of New York and eligi

ble for deposit by banks in Puerto Rico to secure public funds, and by insurance companies to qualify them to do business in Puerto Rico. The Bonds are rated "A"

by Moody's Investment Service and Standard and Poor's.

There has never been any delay in payment of or default on the obligations of the Authority when due nor in those of the Commonwealth, its municipalities and agencies.

THE COMMONWEALTH OF PUERTO RICO

Puerto Rico is the fourth largest of 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 estimated at 2,401,000 as of June 30, 1961. The topography is char

acterized by a fertile coastal plain rising to interior mountains which run mostly from east to west. San Juan, Capital of Puerto Rico, lies some 1,690 miles southeast of New York, 3V2 hours by jet plane, and 1,000 miles southeast of Miami, 2V2 hours by jet plane.

12

L

Sikorsky S-58 Helicopter hauls and sets completely equipped Rural Electrification line pole in mountainous Puerto Rico.

Under its compact with the United States, the Commonwealth of Puerto Rico exercises virtually the same control over its internal affairs, following 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. They are represented in Congress by a Resident Commissioner who has a voice but no vote in the House of Represent atives. On the other hand. Federal taxes do not apply in Puerto Rico except by mutual consent, as is the case with social security taxes and unemployment insur ance. No Federal income tax is collected from Puerto Rican residents on income

earned in Puerto Rico, and Federal excise taxes collected on exported Puerto Rican products, such as rum and tobacco, are returned to the Commonwealth Treasury.

This relationship with the Federal Government is defined through the medium of the compact entered into by Congress and the People of Puerto Rico, and is further described hereafter.

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 gov ernment for the Island in 1900. At that time provision was made for a Governor,

a Cabinet, a Senate and a Supreme Court Judiciary, all appointed by the Presi-

dent 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 less colonial form of government and in favor of United States citizenship. As a result, the original law 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. Both Senate and House were elected by the people, but the Execu tive and Judicial branches remained 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 government occurred in 1950 when, in accordance with the wishes of the People of Puerto Rico, the 81st Congress

enacted Public Law 600, approved July 3, 1950. This law, which is "in the nature of a compact," became effective upon its acceptance by the electorate of Puerto Rico. It provides that those sections 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

Relations Act. It also authorized the People of Puerto Rico to draft and approve their own constitution. The Constitution was drafted by a freely elected constitu tional convention, overwhelmingly approved in a special referendum, and approved

by Congress and the President. It became effective upon proclamation by the Governor of Puerto Rico on July 25, 1952.

THE COMMONWEALTH GOVERNMENT

The Constitution recognizes and assures a separation of powers among the execu tive, legislative, and judicial branches as in the Federal Constitution, and in those

of the States. Both the Governor and the bicameral legislature are subject to regular election every four years. The Legislature operates under standard parlia mentary and legislative rules. The judicial system, administered by a Supreme Court appointed for life, is composed of lower and intermediate courts. 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 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 con

ditions as writs of error and appeals may be taken from other Federal and State courts.

Governmental responsibilities assumed by the Commonwealth are greater than those normally assumed by a State government. Municipalities which combine both rural and urban areas are the only local political subdivisions and are com parable to counties in scope. The only units of government 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 usually performed by local governments in the continental United States. Among these are police and fire protection, education, all major ^4

street and highway construction, and public health programs. In addition, the Commonwealth Government supervises municipal fiscal affairs to a very substan tial extent.

Commonwealth and municipal governments are relieved of most of the respon sibility for constructing and financing electric, water and sewer systems by the Water Resources Authority and the Aqueduct and Sewer Authority. Air and sea port facilities are administered by the Ports Authority. The bonded debt of these public corporations is supported entirely by revenues derived from their operations.

GENERAL

The Capital of Puerto Rico is the city of San Juan, located on an excellent natural harbor in the northeastern section and served by a modern airport which handled nearly 1,500,000 passengers and over 24,000 tons of air freight in fiscal year 1961.

Industrial development has advanced rapidly in the San Juan metropolitan area which includes several cities adjoining the Capital and has a population of about 650,000. San Juan is also the site of the University of Puerto Rico and the center of Commonwealth and Federal Government offices.

On the south coast the principal city is Ponce, noted particularly for the pro duction of sugar products, cement and rum. West of Ponce are important chemi cal and oil refinery operations. In 1959 Union Carbide began operating a new plant near Ponce, marking the trend toward growing heavy industry concentration in the South.

Other leading cities include Mayaguez on the west coast, and Arecibo on the

north, both important for food processing and apparel production. Ramey Air

Aericil view of the modern Monacillo Transmission Center

in San Juan, Lines from 19 hydro and 4 steam-electric sta tions of the Authority converge at this point.

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Force Base, the most important air defense installation of the United States in the Caribbean, is located near the city of Aguadilla, also on the west coast.

Economic growth in Puerto Rico since 1940 has been very rapid. Net income of the economy has increased from a level of $225 million in 1940 to $1,465 million in 1961. Output of the economy, measured in terms of gross product adjusted for price changes, has shown an average increase of about 5.7% com pounded annually.

The Commonwealth Government's program of industrialization has aided the economy to shift from a lopsided dependence on agriculture in general, and sugar in particular, to a high degree of diversification within industry and agriculture.

Concurrently with the expansion in net agricultural income from $70 million in 1939-40 to $200 million in 1960-61, manufacturing income increased from $27 million to $320 million, substantially surpassing agriculture as a source of income.

Puerto Rican manufacturing has been increasingly diversified during the last two decades. In 1939-40 sugar products accounted for 35% of manufacturing income. By 1960-61, about 8 percent of manufacturing income resulted from this industry. Manufacturing income is now generally derived from the production of new types of commodities, principally for shipment to the United States. Such

shipments amounted to only $20 million in 1947-48. By 1960-61 they had reached a total of about $413 million.

These new products were manufactured in over 690 modern plants as of November 1961, and cover a wide range, such as apparel, petroleum and elec tronic products. Large, heavily capitalized manufacturing operations have shown a significant increase in recent years as compared to those labor-intensive opera tions promoted during the early part of the industrialization program. These

include a $30 million polyethylene plant being planned by Union Carbide & Chemical Corp. which already operates a $28 million glycol plant. Petroleum refineries are operated by Commonwealth Oil Refining Co. and Caribbean Refining Co. The latter recently completed an expansion program.

A second rice mill was recently inaugurated, joining a $5 million flour and feed mill in processing an important share of Puerto Rico's food requirements. Two large tuna canneries now in operation, plus two more under construction, will make the Island one of the leading suppliers of canned fish in the United States market.

Further, many of the plants are branches or subsidiaries of such firms as Gen eral Electric, Consolidated Cigar Corporation, Sunbeam Corporation, American

Can Company, Phelps Dodge Corporation, Sperry Rand Corporation, Weston Electric Co., Carborundum Corp., Sprague Electric, Van Camp Sea Food, Van Raalte, B.V.D. Corp., and W. R. Grace Company.

Underlying Puerto Rico's growing and changing economy there has been a steady expansion in investment. Gross fixed investment during the five consecu tive fiscal years 1957 to 1961 ran at the high rate of 21% of gross product.

Inflowing long term U.S. capital rose from $30 million in postwar 1947 to an estimated $219 million in 1961 when it equalled 60% of the $367 million fixed investment registered in that year.

A statistical summary of the economic growth in the creation of a better balance in the economy during the past two decades is presented in the table following.

116

PUERTO RICO WATER RESOURCES AUTHORITY San Juan,Puerto Rico

The Community We Serve Fiscal Years

An Expanding Economy: Net Income — Millions of Dollars

Net Income Per Capita — Dollars Gross Product — Millions of Dollars

1940

1961(1)

Vc of Increase

225.3

1,464.7

550.0

121.0

621.0

413.0

286.7

1,789.0

524.0

92.7

821.0

786.0

17.6

177.2

907.0

311.8

1,900.0

509.0

Commercial Banks: Total Bank Assets — Millions of Dollars

Savings and Time Accounts — Millions of Dollars

Assessed Value of Taxable Property — Millions of Dollars Recurrent Revenues of the Central Government — Millions of Dollars'-' Power Generation — Millions of KWH

.

.

.

26.3

266.4

913.0

166.0

2,287.2

1,278.0

28.0

A Healthier, Better Educated Population: 1,869,000

2,401,000

Birth Rate — Per Thousand

39.0

31.1

20.0*

Death Rate — Per Thousand

18.4

6.7

64.0*

Population

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

46.0

71.0

54.0

286,113 4,987

577,045 18,891

102.0

A More Balanced Economic Life:

279.0

Percentage Points

Percent(%)of Net Income from:

Manufacturing Agriculture Commonwealth and Municipal Government

Change

12.0

22.0

10.0

31.0

14.0

17.0*

9.0

13.0

4.0

Trade

12.0

17.0

5.0

Other

36.0

34.0

2.0*

Percent(%) of Export Trade: Sugar — Raw and Refined Other Exports

62.0

22.0

40.0*

38.0

78.0

40.0

' ' 'Preliminary figures prepared by the Puerto Rico Planning Board.

Includes Federal Grants in Aid.

* Decrease.