Puerto Rico Water Resources Authority (feb. 1969)

FEBRUARY 1969

A SPECIAL REPORT ON

COMMONWEALTH OF PUERTO RICO

GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO SAN JUAN, PUERTO RICO

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PUERTO RICO WATER RESOURCES AUTHORITY

1950 - Our Growth - 1968

Data for the twelve months ended

June 30, 1950

Sales of electricity (Kwh)

.

Revenues from sales

Customers (number) Average sales per customer (Kwh) . . . .

Average revenue per customer

$11,170,000

.

$

65.64

519,014,000 96,230 140,560

Generating capacity installed (nameplate Kw). .

$11,317,000

Times Increased

5,203,247,000

12.6

109,643,000 647,000 8,207

9.8

172.94

2.6

6,113,971,000 1,001,500 1,201,840

10.4

$

177,000 2,419

Generation requirements (Kwh) Annual peak demand (Kw) Revenues (total) Current expenses

411,727,000

November 30, 1968

$

3.7 3.4

11.8

8.6

113,755,000 62,393,000 51,362,000

10.1

$ 5,927,000

$ $ $

Contribution in lieu of taxes

$ 1,178,000

$

3,681,000

12,014,000 38,512,000

10.2

Other contractual obligations

$ 5,390,000

Balance of revenues available for debt service . .

Contractual obligations (total)

11.6

8.7

10.5

.

$ 4,859,000

$

50,526,000

10.4

.

$55,572,000

9.9

25,371,000

$ 549,894,000 102,614.000

$80,943,000

$ 652,508,000

8.1

.

$60,545,000

$ 448,001,000

7.4

Equity of the people of Puerto Rico . . . . .

$24,905,000

$

153,563,000

6.2

Electrical plant in service (at cost) Construction work in progress Electric plant (at cost)

Long term debt and outstanding notes

ON THE COVER

Eastern Airlines Building — a recent addition to the San Juan skyline.

4.0

Commonwealth of Puerto Rico PUERTO RICO WATER RESOURCES AUTHORITY

V 7^ i5b0

Officers

Governing Board

RENAN COLON

Chairman: FRANCISCO LIZARDI

Chief Engineer

Vice-Chairman: ANTONIO CUEVAS VIRET Director, Personnel Office

Members: JENARO BAQUERO

JAVIER CUEVAS BENITEZ Acting General Manager - - Services and Supply HAROLD TORO

ANTONIO M. BIRD

General Manager — Irrigation Services

Attorney at Law

JOSE VILA RUIZ General Counsel

CARLOS VELAZQUEZ TORO

Head, Production and Transmission Division Principal Officers

HUMBERTO CORDERO

Head, Distribution and Sales Division

FELIX CORDOVA DIAZ Executive Director

WILLIAM CANDELARIO

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

JOSE A. MATOS

Head, Electrical Planning and Research Division

EDUARDO LUBE Assistant Executive Director - - Finance

Head, Power Design and Construction Division JOSE 1. DIAZ Controller

LOUIS ROIG MARTINEZ

JULIO NEGRONI Assistant Executive Director - Power Operations

Treasurer

FERNANDO TORRENT

JAVIER CUEVAS BENITEZ Head, Purchasing Division

Assistant Executive Director — Industrial Relations

RAFAEL VAZQUEZ COLON

and Personnel

Head, Personnel Division HECTOR M. MORALES

Head, Transportation and Services HERMANN MUNOZ

Consulting Staff

Public Relations Officer

RAFAEL R. RAMIREZ Power Consultant

RAFAEL D. CHERVONI

Head, Safety Division

PEDRO COLON PAGAN

Consultant — Engineering and Construction

Trustee

First National City Bank. New York. N. Y. Consulting Engineers Jackson and Moreland Division

of United Engineers and Constructors Inc. Auditors Arthur Andersen & Co.

Bond Counsel

Mitchell, Petty & Shetterly

?iQ pte^

Felix Cordova Diaz 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 public service corporation and instrumentality of the Government of the Commonwealth of Puerto Rico.

The origin of the Authority goes back to the opera tion of two government agencies which began the development of hydroelectric power in Puerto Rico

program for the Island was begun as part of "Opera tion Bootstrap." By 1956, for the first time in Puerto Rico's history, net income from manufacturing sur

passed that from agriculture. Today over 1,600 new factories, promoted under the economic develop ment program, are in operation. Such rapid growth and profound change in the basic character of the economy has created a continuous and rapid rise

— 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

in the demand for energy.

the Utilization of Water Resources and ensure a

shown on the inside of the cover page speak for

growth in the supply of electricity which would be

themselves.

adequate for the future needs of Puerto Rico's eco

Throughout the twenty-seven years elapsed since

the Authority came into being its growth has been steady and most impressive. The comparative figures

at a later date, the electric facilities of various irri

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 generating capacity has been added almost every year. Since 1944 total name plate rating of the Authority's generating plant has risen from 64,440 Kw to the present capacity of 1,201,840 Kw. Annual capital construction programs in recent years have

gation services were integrated into the Authority's

reached as high as $71.9 million.

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 State Government as an emergency measure and their operation entrusted to the Authority. In 1944, these systems were purchased by the Authority and,

system.

When the Authority began operations in 1941, the Island's economy was primarily agricultural and heavily dependent on a single crop — sugar. In the latter half of that same decade, an industrialization

The capital construction program for 1968-69 is estimated at $77.9 million. It includes work on units

3 and 4 of 200,000 Kw each at the Palo Seco Steam

Plant. These units are scheduled for completion in 1969 and 1970 respectively. It also includes work

on the fifth and sixth units of the South Coast Plant

which will have a capacity of 400,000 Kw each.

Other important projects included in the program are Unit No. 1 of 400,000 Kw at the new Yabucoa

Steam Plant and several jet 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 tabulation: Puerto Rico

City of Seattle

Department of Water Resources Department of Water and Power Authority Lighting

Electric

Revenues

Dec^3LI968

No\k3o!I96S Dec^h°/l968

$1,004,797,278

$538,078,846

169,078,839

109,843,391

$308,829,401 48,993,949

Number of

Customers . .

ity at the end of October, 1968 had a name plate rating of 1,201,840 Kw and maximum dependable capacity of 1,295,320 Kw. The physical plant pres ently consists of twenty-two generating stations, of which fifteen are hydroelectric, four are thermalelectric, one is diesel and two are jet peaking units.

Thermal-electric facilities now supply about 97 per

cent of the electric energy generated. The Authority's four main generating stations have a total installed name plate rating of 1,066,000 Kw. Steam-Electric Stations

City of Los Angeles

Net Plant . . .

Present Electric System The total installed generating capacity of the Author

1,082,500

Palo Seco Steam Plant — showing two 200,000 Kw units under construction which

will increase the name plate capacity to 575,000 Kw.

The Palo Seco Steam Plant, near San Juan, was

placed in service in 1960 and has two 82,500 Kw steam-electric units and one 10,000 Kw jet peaking unit powered by a kerosene-burning aviation-type jet

motor. This unit is used for peaking and for emer-

Puerto

rico

*»ater

resources

authority

ELECTRIC SYSTEM OCTOBER 31, 1968 •AtAHON -^V'

*0.000 avA \\ SAN JOAN PALO SEC0J420,000 KW EXTENStOli iTS.OOaKwl uUAKn UNatP CONSTR'.rTlonHiW-^

20P00

KW EXTENSION'

r?* a«.Ia®®

AcOS anoClIS 7,90^^ *7.500

3750.V4

CONOtAl

CUATHAAO

COWtlhO PC.HTS ^ ^ X0,OOOK

COACCM ■T.soaiw A

1 '

7.5 00 RVA

UATAOUII YJ.9C0

S.00C «*A coNtmo

VSjOOOAW

,F90KV*

7

A ClOAA ^

CA60AI NO YAM UO«fN/0

■ LSOO

V/fOUES

072KVA

CAMiTt Plan

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I

■^I.OOOIVA/"

MNA vista-T.SOOKVA

[100,000 R« eiTKaSIOMl . _ ^ " UNOCA COMITAUCTION J LEGEND O THCRttAL PLAMTI O MYORO-tLtCIAlC plants A TRANSMISSION SUBSTATIONS A DISTRIBUTION

- 38KV SUBMARINE POWER CaB'.E 'ITCTRIC transmission linys

bCIISTiNC IIS rv electric transmission lines ■ 119 KV electric transmission lines lOn.Af CoAttfaci RESERVOIRS

SUBSTATIONS

gencies, being designed for automatic synchroniza tion to the line from a cold start in only two minutes.

In addition two 200,000 Kw units are in construction

which are expected to be completed in 1969 and 1970. A desalination pilot plant has also been con

structed, to provide 14,400 gallons a day of make-up

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.

water for the main unit boilers. The desalination

process is new and uses waste heat from the turbine condenser system to evaporate sea water in a vacuum.

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 outstanding features of this plant is that it can bum 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 400,000 Kw units are being added to this plant.

The San Juan Steam Plant has an installed capacity

Hydroelectric Stations There are 15 hydroelectric plants with a total installed capacity of 104,840 Kw. Eleven of these plants have reservoirs which permit regulation of plant out put by collecting and storing water inflows during the rainy season for utilization during the dry season, and the remaining four operate on run-of-the-river flows.

Ten of the hydroelectric plants are non-attended and fully automatic.

Bonus Nuclear Power Plant

This plant is under the process of being decommis

of 578,000 Kw in four 20,000 Kw, two 44,000 Kw and four 100,000 Kw steam-electric units and a

sioned as a result of an agreement between the Atomic Energy Commission, owners of the reactor, and the Puerto Rico Water Resources Authority.

10,000 Kw jet peaking unit.

The plant as such, because of its limited capacity

4

of 16,500 Kw, was never intended for continuous commercial operation. It was more a joint research and development project between the two agencies.

As such it was a successful venture because it con

tributed to current nuclear technology and also pro vided an excellent training ground for Authority technicians who in the future may be called upon to operate large nuclear plants. The AEC's invest ment in the project reached $23.5 million whereas the Authority invested $5.6 million in land and con ventional generating equipment. Of these the AEC reimbursed the Authority $1.5 million since the actual cost exceeded the original estimate. Thus the net capital cost to the Authority stands at $3.8 mil lion after deducting depreciation. Of this amount the

cost of land represents $0.3 million.

points throughout the system to insure stability of service and provide an adequate islandwide network.

The transmission system also includes a submarine cable 9.5 miles long which was placed in service during May 1963 to connect the island of Vieques to the Authority's system.

Distribution facihties

include

202

substations

owned by the Authority with a capacity of 956,284/ 1,317,286 Kva which, supplied from the transmis sion 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 aU the Island. In addition, there are

193 privately owned distribution and interchange sub stations with a total capacity of 479,417/521,032 Kva to serve industrial customers, making a total

installed capacity of 1,435,701/1,838,318 Kva. Transmission and Distribution Systems The Authority's transmission system consists of 1,577 circuit miles of 115 Kv and 38 Kv lines, controlled

Rural Electrification

and sectionalized at 143 substations and sectionalizer

Through successive amendments to an original loan

stations, with a total name plate transformer capacity of 2,131,425/3,009,475 Kva located at suitable

tween the Authority and the Rural Electrification

El Monte — a recently completed apartment complex.

contract for $6,376,000, entered into in 1952 be

Administration of the United States, the Authority has borrowed to date $77,040,000 on bonds bearing

any lawful means, including the power of eminent domain.

now totaling $79,040,000. These funds have been loaned by REA for the construction of generation,

For many years the Authority has followed a policy of initially financing the construction of facilities under its Capital Improvement Program with short

transmission and distribution facilities to serve rural

term bank loans. From time to time, issues of revenue

interest at the rate of 2% under a loan contract

bonds are sold for the repayment of such loans and

customers.

By law, the Commonwealth Government contrib

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

Financing System Growth 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 these bonds under a Trust Indenture. It also has full

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

for the continuance of construction. In this way the

facilities producing income for the support of longterm obligations are to a large extent already in oper ation by the time such obligations are issued. Bonds outstanding, including the REA issues, totaled $406,142,000 as of October 31, 1968.

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 October 31, 1968, a total of $638,296,000 was invested in capital improvements.

Of this amount $459,627,000 has been provided from the net proceeds of bond issues and bank bor rowings, and $178,669,000 had come mainly from net revenues of and contributions to the Authority.

On October 31, 1968, total net assets amounted to

GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1946

Average

Kilowatt

Revenue per

Customers

Load

Load

Hours per

Kilowatt

Revenue per

(End of Period)

(Kw)

(Kw)

Customer

Hour

Customer

Sales

Maximum

\ Fiscal Year

(June 30)

(Thousands of Dollars)

(Million Kwh)

Peak

5,764

258.6

124,959

63,000

39,000

2,069

.0223

$ 46.13

1950-51

13,006

488.2

185,090

109,000

69,000

2,638

.0266

70.27

1955-56

25,216 28,693 33,973 35,781 40,441 45,304 50,846 57,520 65,865 72,952 83,734 93,233 104,271 117,460

930.8

1,078.4 1,298.8 1,421.6 1,667.4 1,892.4 2,145.4 2,465.6 2,858.4 3,186.3 3,771.7 4,291.8 4,894.8 5,529.8

314,853 338,685 363,032 385,592 408,671 435,019 459,995 487,991 517,682 552,111 581,369 608,462 635,155 672,000

210,000 249,000 272,000 314,000 355,000 398,000 439,000 498,000 560,000 637,000 737,000 825,000 939,000 1,045,000

129,000 153,000 181,000 198,000 231,000 261,000 294,000 335,000 388,000 436,000 506,000 575,000 657,000 731,000

2,956 3,184 3,578 3,687 4,080 4,350 4,664 5,053 5,522

1945-46

1956-57 1957-58 1958-59 1959-60 1960-61 1961-62 1962-63 1963-64

1964-65 1965-66 1966-67 1967-68

1968-691

t Estimate.

$

5,771 6,488 7,053 7,706 8,229

.0271

80.08

.0266

84.72

.0262

93.58

.0252

92.79

.0243

98.96

.0239

107.34

.0237

113.44

.0233

121.20

.0230

130.85

.0229

132.13

.0222

144.03

.0217

153.23

.0213

164.17

.0212

174.79

NUMBER OF CUSTOMERS

SALES OF ELECTRICITY-KWH

Thousands

Millions of KWH

700

6,000

600

I;:;:::::-:::) Other 4.500

Industrial Commercial

4.000 Residential

Fiscal '60 Years

'SI

'62

'63

64

'65

"66

'67

"68

69*

Fiscal '60

'61

'62

'63

'64

'65

'66

'67

'68

'69

•Estimate

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

$628,615,000, operating and appropriated reserves were $33,430,000, contributed capital and unap propriated net revenues were $121,058,000 and out standing debt was $442,510,000.

Total revenues for the twelve months ended Oc

tober 31, 1968, were $112,511,000. Current ex

penses were $61,798,000, leaving a balance of $50,713,000 available for debt service requirements and other contractual obligations. The maximum

debt service for any future year on outstanding issues was $21,690,000, indicating a coverage of 2.36 times on present debt. Accruals for contributions to the Commonwealth and municipal governments in lieu of taxes amounted to $11,879,000 during the same period.

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 February 1969, the Authority proposes to sell $60,000,000 par value Electric Revenue Bonds for the purpose of liquidating current bank borrowings and continuing the Capital Improvement Program.

Preliminary calculations indicate that the Author ity's maximum annual debt service, upon the comple tion of the financing, will approximate $25,672,000 and will be covered about 2.00 times by net earnings for the twelve months ended November 30, 1968.

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 1,045,070 Kw in 1968-69 to 1,211,760 Kw in 1969-70, 1,521,290 Kw in 1970-71 and 1,782,000 Kw in 1971-72. It is expected that over 30,000 new customers will be added yearly. To meet this demand, the Authority's generating capacity

m

Las Americas — the largest shopping center in Puerto Rico, in metropolitan San Juan, consisting of 79 stores, completely air conditioned.

will be raised to a name plate rating of 2,501,840 Kw

by June 1972.

During the period from July 1, 1968 through June 30, 1972, it is anticipated that the Authority will invest $420,459,000 in further capital improvements.

Of this amount, the sale of bonds will provide some $310,745,000. About $107,571,000 or 26% will be

derived principally from revenues of the Authority, compared with an average of 28% accrued from

earnings and contributions during the last twenty-one years. The remainder of $2,143,000 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 400 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 Authority under special agreements with the Commonwealth Government is willing to provide power at prices based on the incremental cost of power of the larger units. In order to make the con

struction of the larger units economically feasible

for the Authority, the Legislature of Puerto Rico approved Law #82 of 1967 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 1971 to 1974 up to a limit of $3,250,000 during each of these four years. Such amounts would be deducted from the

contribution in lieu of taxes payable to the Common wealth Government.

The above four-year program compares with capi tal expenditures actually made during the past twentyone years, distributed as follows: steam production plant $229,405,000, nuclear production plant

$5,602,000, hydraulic production plant $36,267,000, gas turbine production plant $17,919,000, transmis sion plant $79,696,000, distribution plant $187,564,000 and other facilities $81,843,000 for a total of $638,296,000,

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 Indenture to the credit of the General Reserve Fund

and the Renewal and Replacement Fund, and for payments in lieu of taxes to the Commonwealth and 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 preceding twenty-four months, after deducting the cost of maintaining, repairing and operating these

properties during the same period, must be not less than 150 percent of maximum debt service payable in any succeeding fiscal year on all bonds, including the proposed issue. By supplemental indenture, to become effective only when all presently outstanding bonds issued prior to 1965 have been retired, this percentage will 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 and trust funds in the state of New York and for savings banks in

California and are eligible 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 Investors Service and by Standard and Poor's.

In the credit history of Puerto Rico, its municipali ties, authorities, agencies and other political sub-

TOTAL REVENUES, BALANCE AFTER CURRENT EXPENSES,

REVENUES FROM SALES OF ELECTRICITY

AND DEBT SERVICE REQUIREMENTS Millions of Dollars

Millions of Dollars

130

120

120

Total Revenues

I

[ Balance After Current Expenses Debt Service Requirements

Residential

Fiscal

Fiscal

Years

Years

mil I I Jl '60

'61

•Estimate

'62

'63

"64

'65

Including Fuel Oil Adjustment

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

â– 67

'68

Puerto Rico Water Resources Authority

Condensed Balance Sheet As of October 31, 1968

ASSETS

NET UTILITY PLANT:

Gross utility plant Less accumulated provision for depreciation

$644,934,476 113,417,592

Net utility plant

$531,516,884

OTHER PHYSICAL PROPERTY

168,370

BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS

20,012,181

CURRENT ASSETS:

Funds and working advances

$ 20,750,928

Accounts receivable — Less Reserve for uncollectible accounts

21,126,813

Materials and supplies Prepayments, special deposits, etc

19,103,930 1,920,793

62,902,464

DEFERRED DEBITS:

Debt discount and expense in process of amortization

$ 12,169,833

Other

1,845,134 TOTAL ASSETS

14,014,967 $628,614,866

LIABILITIES

CONTRIBUTED CAPITAL

$ 45,298,284

UNAPPROPRIATED NET REVENUES

75,759,366

LONG-TERM DEBT:

Electric revenue bonds Notes payable

$406,142,000 33,900,000

Lease-purchase obligation, less portion included in current liabilities . . .

2,467,676

442,509,676

$ 11,439,560 5,238,935 4,685,880 4,251,173 6,002,073

31,617,621

CURRENT LIABILITIES:

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

Self-insurance Injuries and damages Revenue stabilization

Appropriated sinking fund Plant improvements TOTAL LIABILITIES 10

$

7,812,096 2,649,164 1,355,718

21,577,925 35,016

33,429,919 $628,614,866

Puerto Rico Water Resources Authority

Condensed Statements of Revenues and Expenses (For Revenue Fund Purposes per Trust Indenture) Twelve Months Ending Oct. 31 1968

June 30 1965

June 30 1966

June 30 1967

June 30 1968

$72,952,446

$83,734,015

$93,232,606

$104,270,618

$108,426,118

1,644,048

1,890,939

2,085,113

Other operating revenues Total operating revenues . . . . $74,596,494 $85,624,954 $95,317,719

2,111,965

2,198,053

$106,382,583

$110,624,171

1,182,929

1,369,968

1,420,789

1,781,295

1,886,557

$75,779,423

$86,994,922

$96,738,508

$108,163,878

$112,510,728

$10,709,138

$12,035,637

$13,671,019

$ 15,434,275

$ 14,698,538

19,894,285

22,518,518

25,011,077

28,348,610

30,599,505

9,339,608

10,717,943

11,840,030

14,263,000

15,430,612

REVENUES:

Sales of electric energy

Other income Total revenues

CURRENT EXPENSES:

Operation — Fuel

Other operating expenses Maintenance

750,520

1,045,519

1,010,175

937,572

1,069,236

$40,693,551

$46,317,617

$51,532,301

$ 58,983,457

$ 61,797,891

penses (per Trust Indenture) . . $35,085,872 $40,677,305

$45,206,207

$ 49,180,421

$ 50,712,837

Other current expenses

Total current expenses Balance of revenues after current ex

SINKING FUND PAYMENTS:

Interest account (exclusive of interest

charged to construction and reimburse ment from the Commonwealth Govern

$ 8,426,525

$ 9,061,921

$ 9,555,562

$ 11,166,209

$ 11,576,481

4,631,960 220,116

5,992,000 207,304

5,710,000

207,304

6,685,000 787,908

6,889,299 884,944

Total sinking fund payments . .

$13,278,601

$15,261,225

$15,472,866

$ 18,639,117

$ 19,350,724

Balance

$21,807,271

$25,416,080

$29,733,341

$ 30,541,304

$ 31,362,113

$

$

ment of Puerto Rico)

Bond redemption account (exclusive ot reimbursement from the Common wealth Government of Puerto Rico) Reserve account

TRANSFERS TO:

General reserve fund — provision for self824,926

909,838

12,397,814

14,617,510

12,393,200

13,671,744

5,160,000

3,516,925

3,475,968

$13,075,892

$15,348,412

$18,378,126

$ 18,098,507

$ 18,616,997

Balance available for contributions in $ 8,731,379 lieu of taxes, etc

$10,067,668

$11,355,215

$ 12,442,797

$ 12,745,116

9,172,130

10,213,261

11,423,274

11,879,259

insurance

Renewal and replacement fund .

Total transfers

678,078

730,902

>

$

943,341 14,197,688

PROVISIONS FOR CONTRIBUTIONS IN 7,989,345

LIEU OF TAXES

$

742,034

$

895,538

$ 1,141,954

$

1,019,523

$

865,857

Transfer to sinking fund reserve account $ Balance transferred to unappropri

371,017

$

447,769

$

570,977

$

509,762

$

432,929

$

371,017

$

447,769

$

570,977

$

509,761

$

432,928

Balance

PROVISION FOR:

ated net revenues

11

divisions, there is no known record of default or de

and House were to be elected by the people, but 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

Executive and Judicial branches remained under con

trol of Washington through appointment by the President.

No further change occurred until 1946 when the President for the first time appointed a Puerto Rican

default.

Government History

as Governor. In 1947 the Jones Act was amended to

Puerto Rico came under United States sovereignty by the Treaty of Paris on December 10, 1898. The Con

gress of the United States provided for a civil gov ernment 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.

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

Over succeeding years strong feeling developed for

pact," became effective upon its acceptance by the

a more autonomous form of government and in favor

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

of United States citizenship. The original Act 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 pur poses. It also provided that members of both Senate

The world's largest radio-radar telescope at Arecibo, a client of

the Authority.

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

San Juan tourist area

where many luxury hotels are located.

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

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.

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 conditions 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 as

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

The Constitution recognizes and assures a separation

of powers among the executive, legislative, and judi cial branches as in the Federal Constitution, and as in those of the States. Both the Governor and the bi

cameral 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

political subdivisions and are comparable to counties in scope. The only units of government with the right to levy ad valorem taxes are the Commonwealth Gov ernment 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 performed by local govermnents in the Continental United States. Among these are

police and fire protection, education, all major street construction, and public health programs. In addi tion, the Commonwealth Government supervises

municipal fiscal affairs to a very substantial extent.

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Supervisor checking breaker status on system single line diagram at Monacillos.

Commonwealth and municipal governments are relieved of most of the responsibility 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, and major highway construction is financed by the Highway Authority. The bonded debts of these public corpora

tions, with the exception of the Highway Authority, are supported entirely by revenues derived from

their operations. Bonds issued by the Highway Authority are supported by a portion of the gasoline tax.

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

almost negligible 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% 45.0%

3.3%

—

—

—

—

19.0% —

12.5% —

3.3% —

2.7% 3.3%

3.0% —

Commonwealth

Popular Democratic Party . .

Peoples Party Statehood

Statehood Republican Party .

New Progressive Party Socialist Party

Independence Party Christian Action Party

As a general comment, it is obvious that desire for close and permanent ties with the United States has become an inherent ingredient.

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. Politi-

cal status did not receive emphasis as an immediate

issues to the attention of, and to inform the voters,

issue. He received 45.0% of the vote in the recent

each recognized political party receives from the Commonwealth Treasury a contribution of funds to

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.

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 years. Yet, recognizing the need for funds to bring

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, 1960) 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 the Congress of the United States requesting a

Partial view of San Juan Steam Plant, foreground;

plebiscite by the voters of Puerto Rico through which

port facilities and skyline, background.

an expression of preference could be demonstrated for either a continuation of the existing common

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

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 ail registered votes) 99.4 percent were for

either Commonwealth or Statehood and only 0.6

facturing has increased to 24.5 percent. This has been

percent for Independence. A tabulation of the actual results of the plebiscite is shown below:

the result of Puerto Rico's ambitious industrialization

425,132 (60.4%) 274,312 (39.0%) 4,248 ( 0.6%)

Commonwealth Statehood

program known as "Operation Bootstrap".

Manufacturing itself has been diversifying at a

rapid pace. Manufacturing net income is now de

Political stability, one of the prime requisites of a sound, attractive investment climate, is outstandingly

rived mostly from new factories promoted by the Economic Development Administration. These fac tories export most of their output to continental United States and are now responsible for the largest share of exports. While in 1950 total exports reached $235 million, only $33 million or 14.0 percent was

demonstrated in Puerto Rico. Only a declining minor

derived from new factories. This picture has changed

ity party favors independence. Both major parties 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

$1,449 million new factories accounted for $1,012

Independence

take.

dramatically in 1968. Of total exports amounting to million or 69.8 percent. These new factories manu facture a wide range of products such as apparel, petroleum derivatives, electronic components, food products, pharmaceuticals, etc.

Large, heavily capitalized manufacturing opera

Expansion and Diversification of the Economy of Puerto Rico

tions have shown a significant increase in recent years

The economy of Puerto Rico continues its outstand

as compared to those labor intensive operations

ing rate of growth. In 1968 the Gross Product of the

Commonwealth reached $3,740 million, representing a rate of increase of 11.4 percent and equivalent to almost five times the level reached in 1950.

Net income has kept pace with a level of $3,076 million in 1968. This represents a growth rate of 10.7 percent. In 1950 this same figure reached $614 mil lion. In terms of current prices, net income has

shown an average increase over the last five years of 10.0 percent compounded.

The growth of the economy has brought about a

corresponding increase in family income. The per sonal income per family in 1968 reaehed $5,178 as compared with a level of only $1,500 in 1950. This represents a growth rate of 10.7 percent for 1968.

The economic changes experienced by Puerto Rico during the last eighteen years have been ex traordinary. In a relatively short period of time the

Island has managed to shift from an agricultural to a more balanced economy, concentrating in the de velopment of a strong industrial base. Whereas in 1950 agriculture made up 24.3 percent of net in come and manufacturing 14.5 percent, the situation has now changed. For 1968 agriculture's share has declined to 6.1 percent and net income from manu

Helicopter lifting ahtminum tower for 115 KV transmission line.

Supervisor checking breaker position at Monacillos 115 KV switchyard.

Petrochemicals are of increasing importance to

promoted during the early part of the industrializa tion program. These include Union Carbide Caribe

the economy of the Commonwealth. An important

which operates a $53 million glycol plant and a $22 million plant to produce alcohol intermediates. At a

development has been the addition of a $43 million aromatic plant to Commonwealth Oil Refining Com

recent date the Company announced that it will triple

pany's $105 million refinery. Corco has invested

its investment in Pefiuelas and that with other addi

$180 million in Puerto Rico in the past ten years and

tions it will increase its investment in Puerto Rico to

the present plans call for increasing the company's investments to approximately $300 million by 1970.

Construction has begun on the sixth and seventh plants in the Corco complex on Puerto Rico's south coast. A 50 percent expansion of Hercor Chemical Corporation's paraxylene plant, jointly owned by

approximately $250 million. Major additions at Penuelas are scheduled to be completed by 1970.

They will include an olefins core plant with a capacity of more than one billion pounds of ethylene a year.

It will be designed to operate on both locally avail able and imported raw materials. Another wholly owned subsidiary, Union Carbide Grafito, Inc. plans to build a $40 million graphite plant in Puerto Rico which will be the most modern graphite electrode facility in the world. This facility will be operation in 1970 to serve the expanding needs of electric and furnace steelmakers in the United States and through

Grace & Co. The investment in the new facility will

out the world.

amount to approximately $47 million. The joint

Corco and Hercules Incorporated, is also under way

at the complex. The two new plants are a second aromatics facility wholly owned by Corco, which will approximately double the company's production of aromatic chemicals, and a large oxo-alcohols plant,

to be owned in equal shares by Corco and W. R.

m

Workers installing high pressure shell for the new 230,000 KW turbo-generator at Palo Seco Steam Plant.

Corco-Grace investment in the oxo-alcohols plant will exceed $30 million.

Inauguration of the $61 million Phillips Puerto Rieo Core Inc. petrochemical plant took place December 15, 1967 at the plant site near Guayama on the southeastern coast of Puerto Rico. There are

several different facilities within the Phillips com

plex, in addition to the $61 million Core plant itself.

An important one is Fibers International Corpora tion's $57 million satellite plant which is estimated to

produce 40 million pounds per year of Nylon 66.

The company is owned jointly by Phillips Petroleum Company and Rhone-Poulenc, S. A. The man-made harbor costing $6.8 million and the $4 million orthoxylene plant are also part of the complex. The Phillips Core facility will produce various chemicals such as benzene, cyclohexane, toulene, paraxylene and orthoxylene from a daily shipment from Vene zuela of 28,000 barrels of virgin naphtha. These chemicals, in turn, will be used to manufacture such

ing satellite facilities, will reach $600 million and will create an estimated 33,000 jobs for Puerto Ricans.

Sun Oil Company plans to invest $125 million in

Puerto Rico following approval of an application for an import quota for 60,000 barrels a day of crude oil. The right of access into the continental United States for 29,500 barrels a day of petroleum products has been granted. The facilities will be built at Yabucoa on the east coast. Along with them. Sun will build an all-weather, multiple-purpose harbor estimated to cost $12 million. It will have a 55 foot deep channel and a ship-turning basin with docks able to handle vessels up to 100,000 deadweight tons.

Food proeessing has also been a significant growth area in reeent years. Three rice mills and a large flour and feed mill supply an important share of Puerto Rico's requirements. Four large tuna canner ies are now in operation. The Island has become one of the leading suppliers of canned fish in the United States market. A soybean processing plant producing

materials as plastics, rubber products, nylon, deter gents, dyes, and other end or intermediary products.

cake for the growing cattle and dairy industry, and

It is estimated that total eventual investment, includ

ies was also established. A subsidiary of Libby,

oil for the domestic market and for the tuna canner

McNeill and Libby has established a plant for the canning of tomato sauce and juice produced from local crops and Standard Brands, through one of its subsidiaries, has established a plant for the manufacture of dessert preparations and baking powder.

Other sectors of the economy have also been ex

panding rapidly and a substantial amount of invest

ment has been required to keep up with this growth.

The tourist industry has shown a remarkable increase.

Visitors to the Island reached 911,000 in the past

Many of the plants promoted by the Economic Development Administration are branches or subsidi

fiscal year spending about $202 million. To serve this ever growing number of visitors many facilities have required expansion. As a result some of the larger

aries set up by such firms as General Electric, Con

hotels are expanding their facilities.

solidated Cigar, General Cigar, American Can, Phelps Dodge, Daystrom, Carborundum, Sprague Electric, Van Camp Sea Food, General Foods, Van Raalte, Hooker Chemical, B.V.D., Bell & Howell, Interna tional Shoe, National Cash Register, Hercules Pow

The Caribe Hilton and La Concha are both start

ing multimillion dollar expansions. The Caribe will add a 23-story annex with 221 rooms and a conven tion hall with a capacity of 1,000 persons. Construc

tion is expected to be completed by 1970. La Concha

der, Stanley Works, Pepsico, W. R. Grace, Ford Motor Co., Phillips Petroleum, Babcock and Wilcox, Cutler-Hammer, Endicott Johnson, Jonathan Logan,

is adding a 20-story building with 204 rooms, a new

Motorola, RCA and Westinghouse.

exceed $7 million. Also in San Juan, the Miramar is

Eli Lilly and Company dedicated a new $10 mil lion pharmaceutical manufacturing plant in Carolina, Puerto Rico, in August, 1968. The new plant con sists of seven buildings with a total of 210,000 square feet in which some 350 employees will produce phar maceutical products and empty gelatin capsules.

pool and a large convention size ballroom. The proj ect will start early next year. Total investment will building a smaller 84-room hotel called the Petit Miramar, on the shoreline beside the Condado Beach

Hotel. Continuing efforts to expand tourism beyond the San Juan area have also borne fruit. Associated

Federal Hotels will develop a $2.5 million resort in the hill town of Coamo. The new resort will have an

Operator checking data from the economic load dispatch computer at Monacillos transmission and distribution center.

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18-hole golf course, tennis courts, riding stables, fresh and sea water pools, an orchid garden and a private

consecutive fiscal years, I964-I968, ran at the high rate of almost 26% of gross product. It has increased

airfield. It will be ready in approximately two years.

from $111 million in 1950 to $973 million in 1968.

Airport facilities have also required expansion.

Puerto Rico International Airport has inaugurated a new $3 million passenger wing, first of several

Inflowing long-term U.S. capital rose from $31 mil lion in postwar 1947 to an estimated $581 million

facilities planned in a $30 million expansion pro gram. The new wing, which includes nine passenger boarding gates, will ease traffic flow for the nearly 4,500,000 travelers who will pass through the air port this year.

The Island is also making preparations for the coming of jumbo jets. The Ports Authority is adding 235,000 square feet of space to the main terminal.

This will include the Island's first "jet ways" system of mobile boarding compartments. Another 8,000 foot landing strip is also being added. The Puerto Rico Ports Authority is also planning to build a second international airport, to be located in the

The Puerto Rican people have benefited in many ways 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 thousand to 6.1 per thousand at present.

The birth rate has declined from 39.6 per thousand in 1950 to 25.9 per thousand in 1968. The people are better educated, with literacy increased from 75% to about 86%. Institutions of higher learning

southwest of Puerto Rico.

public day schools.

Underlying Puerto Rico's growing and changing economy there has been a steady expansion in invest ment. Gross fixed investment during the last five

ment has in the last three years devoted approxi mately 47% of its budget to education and health.

in 1968.

have also expanded rapidly. University and college enrollment increased from only 13,000 in 1950 to about 48,000 in 1968. At the end of fiscal year 1968 over 670,000 children were enrolled in the Island's It is significant that the Commonwealth Govern

Authority's helicopter taking off from main office building.

Helicopters are u.sed to patrol transmission lines and to provide rapid transportation for Authority personnel.

L

PUERTO RICO WATER RESOURCES AUTHORITY San Juan, Puerto Rico

The Community We Serve Approximate Times

Increased or

(Decreased)

An Expanding Economy: Gross Product — $ Millions

1940

.

.

.

.

1950

1968

Over 1950

287

755

3,740

5.0

Net Income — $ Millions

225

614

3,076

5.0

Personal Income Per Family — $ . . .

611

1,500

5,178

3.5

73

319

1,715

5.4

17

51

407

8.0

312

459

3,448

7.5

2

28

186

6.6

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

24.5

Agriculture Commonwealth and Municipal Government

31

24.3

6.1

8

11.4

14.0

2.6

Trade

12

16.6

17.8

1.2

Other

37

33.2

37.6

4.4

Exports by New Factories* Sugar (Raw and Refined)

14.0

69.8

62

51.1

5.7

(45.4)

Other

38

34.9

24.4

(10.5)

10.0

(18.2)

Per Cent of Exports from:

Per Cent

A Healthier, Better Educated Population: Population

55.8

Change

1,869,000

2,211,000

2,739,000

Birth Rate — Per Thousand

39.0

39.6

25.9

(34.6)

Death Rate — Per Thousand

18.4

10.5

6.1

(42.0)

46 286,000 5,000

61 408,000 13,000

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. tMay, 1968.

70.0

670,000t 48,000

23.9

14.8 64.2 269.2

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AD ASTRA PER ASPERA

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

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