Puerto Rico Water Resources Authority (march 1968)

•X - - ■ ii; .ft

March 1968

COMMONWBAUTH OF PUERTO RICO

GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO SAN JUAN. PUERTO RICO

mmm'

B£lI3^ r.n^e

C-:)'. -u

yijlU^L I Ik8

PUERTO RICO WATER RESOURCES AUTHORITY

1950 - Our Growth - 1967

Data for the twelve months ending Times

June 30, 1950

December 31, 1967

Increased

Sales of electricity (Kwh)

411,727,000

Revenues from sales

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

Average revenue per customer

4,620,631,000 98,838,000 $ 619,915 7,592

11.2

$11,170,000 177,000 2,419 $

$

162.39

2.5

.

Generation requirements (Kwh) Annual peak demand (Kw) Generating capacity installed (nameplate Kw).

519,014,000 96,230 140,560

5,408,791,000 892,400 1,118,340

10.4

.

$11,317,000

. .

Balance of revenues available for debt service .

$ 5,390,000 $ 5,927,000

$ 102,466,000 55,219,000 $ 47,247,000 $

Revenues (total)

Current expenses

65.64

8.0

$ 516,304,000 68,817,000

9.3

$80,943,000

$ 585,121,000

7.2

$60,545,000

$ 399,503,000*

6.6

Electrical plant in service (at cost) . . . .

.

9.1 10.2

$55,572,000 25,371,000

$

Long term debt and outstanding notes . .

8.0

9.5

$ 4,859,000

Electric plant (at cost)

9.3

46,117,000

.

Construction work in progress

3.1

9.2

$

Contractual obligations (total)

3.5

10,828,000 35,289,000

$ 1,178,000 3,681,000

Contribution in lieu of taxes

Other contractual obligations

8.8

Equity of the people of Puerto Rico . . . . . $24,905,000

$

136,927,000

9.6

2.7

5.5

* With the present balance of revenues for debt service, if expansion needs required, the Authority could issue roughly $188,000,000 in additional revenue bonds within the limits established by the Trust Indenture securing these bonds.

ON THE COVER

Equipment for High Pressure Washing of Transmission Conductors.

Commonwealth of Puerto Rico PUERTO RICO WATER RESOURCES AUTHORITY

)/7-

l^S'O

Governing Board

Officers RENAN COLON

Chairman; HON. FRANCISCO LIZARDI

Secretary of Public Works

Chief Engineer FELIX CORDOVA DIAZ

Vice-Chairman: ANTONIO CUEVAS VIRET Director, Personnel Office

Members; HON. JENARO BAQUERO Secretary of Commerce

General Manager — Services and Supply HAROLD TORO

General Manager — Irrigation Services JOSE VILA RUIZ

RAFAEL DURAND

General Counsel

Administrator, Economic Development Administration

CARLOS VELAZQUEZ TORO

ANTONIO M. BIRD

HUMBERTO CORDERO

Attorney at Law

Head, Distribution and Sales Division

Head, Production and Transmission Division

WILLIAM CANDELARIO

Head, Electrical Planning and Research Division JOSE A. MATOS

Principal Officers

Head, Power Design and Construction Division

RAFAEL V. URRUTIA Executive Director

JOSE I. DIAZ Controller

DR. MODESTO IRIARTE

LOUIS ROIG MARTINEZ

Assistant Executive Director — Electrical Planning,

Treasurer

Construction and Research

JAVIER CUEVAS BENITEZ

EDUARDO LUBE Assistant Executive Director — Finance JULIO NEGRONI

Assistant Executive Director — Power Operations

Head, Purchasing Division RAFAEL VAZQUEZ COLQN Head, Personnel Division HECTOR M. MORALES

Head, Transportation and Services FERNANDO TORRENT

Assistant Executive Director — Industrial Relations

HERMANN MUNOZ Public Relations Officer

and Personnel

RAFAEL D. CHERVONI

Head, Safety Division

Consulting Staff

Trustee

First National City Bank, New York, N. Y. RAFAEL R. RAMIREZ

Consulting Engineers

Power Consultant

Jackson and Moreland Division PEDRO COLON PAGAN

of United Engineers and Constructors Inc.

Consultant — Engineering and Construction Auditors Arthur Andersen & Co.

Bond Counsel

Mitchell, Petty & Shetterly

^/opieot

latter half of that same decade, an industrialization

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 1,400 new faetories, promoted under the economic develop ment program, are in operation. Sueh rapid growth and profound change in the basic character of the economy has created a continuous and rapid rise Rafael V. Urrutia

in the demand for energy.

Executive Director

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

and most impressive. The comparative figures shown

Puerto Rico

Water Resources Authority

on the inside of the cover page speak for themselves.

From its inception the Authority has had to con stantly 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. Since 1944 total name plate rating of the Authority's generating plant has risen from 64,440 Kw to the present capacity of 1,118,340

The supply of electric energy in Puerto Rico's fast growing economy is the responsibility of the Puerto Rico Water Resources Authority, an autonomous

Kw. Annual capital construction programs in recent years have reached as high as $58,000,000.

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

estimated at $62 million. It includes work on three 100,000 Kw units for the San Juan Steam Plant.

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

Two units have already been completed. The other is scheduled for completion in March 1968. Also two 200,000 Kw units are in construction at the Palo Seco Steam Plant. Other important projects are the

Water Resources of Puerto Rico, created in 1927. In

throughout the system. This program also includes general transmission and distribution facilities, rural electrification projects, the acquisition of land and the construction of buildings, and miscellaneous items.

When current projects are completed, total gener

1941, the Authority was established by law to replace the Utilization of Water Resources and ensure a

growth in the supply of electricity which would be

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

The capital construction program for 1967-68 is

installation of five 20,000 Kw jet peaking units,

ating capacity will be 1,718,340 Kw.

The Authority has grown to become the second largest municipally owned, integrated electric utility

States Government as an emergency measure and

in the United States as is indicated by the following

their operation entrusted to the Authority. In 1944, these systems were purchased by the Authority and,

tabulation:

at a later date, the electric facilities of various irri

City of Los An/^eles Puerto Rico Department of Water Resources Water and Power Authority

gation services were integrated into the Authority's 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

City of Seattle Department of Lighting

As of

As of

As of

Dec. 31,1967

Dec. 31, 1967

Dec. 31,1967

Electric Revenues

$954,089,308 $179,848,683

$481,969,410 $ 98,838,076

Number of Customers . .

1,070,364

Net Plant . . .

$295,991,907 $ 46,789,059

Present Electric System The total installed generating capacity of the Author

ity at the end of December 1967 had a name plate rating of 1,118,340 Kw and maximum dependable capacity of 1,202,320 Kw. The physical plant pres ently consists of twenty-three generating stations, of which fifteen are hydroelectric, four are thermalelectric, one is nuclear, one is diesel and two are jet peaking units. Thermal-electric facilities now supply about 96 percent of the electric energy generated.

The Authority's four main generating stations have a total installed name plate rating of 966,000 Kw. Steam-Electric Stations

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

A desalination pilot plant has also been inaugurated,

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

Arrival of the stator of a 200,000 Kw generator for the Palo Seco Steam Plant.

With this addition the plant will have

an installed capacity of 375,000 Kw Name Plate Rating in 1969.

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 burn either low

cost refinery pitch or Bunker C fuel oil. This plant currently receives its fuel by direct pipe fine from the nearby refinery of the Commonwealth Oil Refining Co.

The San Juan Steam Plant has an installed capacity of 478,000 Kw in four 20,000 Kw, two 44,000 Kw and three 100,000 Kw steam-electric units and a

10,000 Kw jet peaking unit. Work on another 100,000 Kw unit, scheduled for completion in March 1968, is under way. This wiU increase the capacity of the plant to a name plate rating of 578,000 Kw.

The Mayaguez Plant is equipped with two gas turbine generators whose rated capacity is 20,000 Kw each. The main purpose of these turbines is to handle peak loads. A 10,000 Kw jet peaking unit was in stalled recently.

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

PUERTO RICO WATER RESOURCES AUTHORITY

ELECTRIC SYSTEM DECEMBER 31. 1967

AA(

«TENS,

SAN JUAN [lOCpOO KW EXTENSION 4T«Aoo R nL uNoen cohstauction

J

S.ooo KVA ^0* VIAPUCTO-».200

Acos ANCCLCS 3750 avA

COROIAL S.OOOHV*

7.500 RVA

CAONILLA

2aaoo,#;^

lAOOavA

TORO KESRO NO.2 RO NE6R0

I.»10

VAUCO NO

6ARZA NO.I UOOKB

•40 IN

vJeoues CAVEY

COAMO NO fSO RVA

AUCO N0 2

BA.JfJAVA^/ »J>00 ■ 7A00M

3,072KVaX

PONCt

.7J00 RXk

BUtNA vbta^iSOOKVA

•0,000

3,200

LEGEND □ THERMAL PLANTS ^1 NUCLEAR PLANT

(BONUS)

O htoro-elcctric plants

)A TRANSMISSION SUBSTATIONS DISTRIBUTION

■BBi JET

TBKV SUBMARINE POWER CABLE —— 30 RV ELECTRIC TRANSMISSION LINES

EXISTING IISKV ELECTRIC TRANSMISSION LINES ■ 115 RV electric transmission LINES (Undtr C««>liueli««| RESERVOIRS

SUBSTATIONS

POWER PACR

UNITS

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.

Nuclear Power Plant

A nuclear power plant with a rated capacity of 16,500 Kw and utilizing a new and advanced type of boiling water reactor and nuclear superheater, located on the western tip of Puerto Rico, was placed in ser vice in January 1966. It was constructed under the terms of a contract between the Authority and the Atomic Energy Commission. The Authority has pro

vided the plant site and the conventional generating components; the AEC, the nuclear reactor. This proj ect is giving the Authority the necessary experience to undertake large scale generation by means of nuclear reactors when such generation becomes economically

and sectionalized at 132 substations and sectionalizer

stations, with a total name plate transformer capacity of 1,919,675 Kva located at suitable points through out the system to insure stability of service and pro vide an adequate islandwide network. The transmis sion 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 Au thority's system.

Distribution facilities include 200 substations owned

by the Authority with a capacity of 895,028 Kva which, supplied from the transmission network, con vert the electric power for distribution at 2,400/4,160 Y, 4,800/8,320 Y and 7,620/13,200 Y volts through distribution feeders which traverse all the Island. In addition, there are 182 privately owned distribution substations with a total capacity of

feasible.

448,411 Kva to serve industrial customers, making a total installed capacity of 1,343,439 Kva.

Transmission and Distribution Systems

Rural Electrification

The Authority's transmission system consists of 1,545

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

circuit miles of 115 Kv and 38 Kv lines, controlled

tween the Authority and the Rural Electrification

ties. Properties may be acquired by the Authority by

Administration of the United States, the Authority has borrowed to date $76,040,000 on bonds bearing

any lawful means, including the power of eminent

interest at the rate of 2% under a loan contract for a like amount. These funds have been loaned

domain.

For many years the Authority has followed a policy of initially financing the construction of facilities

by REA for the construction of generation, trans

under its Capital Improvement Program with short

mission and distribution facilities to serve rural

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

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 $374,703,000 as of December 31, 1967.

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, 1967, a total of $578,602,000 was invested in capital improvements.

Of this amount $416,775,000 has been provided from the net proceeds of bond issues and bank bor rowings, and $161,827,000 had come mainly from net revenues of and contributions to the Authority.

GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1946 Sales

Maximum Peak

Average

Kilowatt

Load

Hours per

Revenue per

Revenue

(Million Kwh)

Customers

(June 30)

(Thousands of Dollars)

Load

(End of Period)

(Kw)

(Kw)

Customer

Kilowatt Hour

Customer

1945-46

$ 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*

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

210,000 249,000 272,000 314,000 355,000 398,000 439,000 498,000 560,000 637,000

1965-66*

83,734

1966-67*

93,233 105,100

314,853 338,685 363,032 385,592 408,671 435,019 459,995 487,991 517,682 552,111 581,369 608,462 638,500

129,000 153,000

1964-65*

25,216 28,693 33,973 35,781 40,441 45,304 50,846 57,520 65,865 72,952

2,956 3,184 3,578 3,687 4,080 4,350 4,664 5,053 5,522 5,771 6,488 7,053 7,573

Fiscal Year

1956-57* 1957-58* 1958-59*

1959-60* 1960-61*

1961-62* 1962-63* 1963-64*

1967-68t

3,771.7 4,291.8 4,835.4

* After applying fuel oil adjustment clause, t Estimate.

737,000 825,000 930,000

181,000 198,000 231,000 261,000 294,000 335,000 388,000 436,000 506,000 575,000 644,000

per

.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

.0217

164.60

H-

Phillips Petroleum Company's recently inaugurated core plant.

On December 31, 1967, total net assets amounted to

adequate to meet the Authority's operating expense

$576,385,000, operating and appropriated reserves

and contractual obligations.

were $32,159,000, contributed capital and unap propriated net revenues were $107,640,000 and out standing debt was $401,985,000.

Total revenues for the twelve months ended De

cember 31, 1967, were $102,466,000. Current ex

penses were $55,219,000, leaving a balance of $47,247,000 available for debt service requirements and other contractual obligations. The maximum debt service for any future year on outstanding issues was $19,359,000, indicating a coverage of 2.46 times

on present debt. Accruals for contributions to the

New Bond Issue

In March 1968, the Authority proposes to sell

$38,000,000 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 $21,678,000 and will be covered over 2.19 times by net earnings for the twelve months ended December 31, 1967.

Commonwealth and municipal governments in lieu of taxes amounted to $10,828,000 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

Continuous studies of power needs, constantly re viewed and revised by the Authority and its consulting engineers, now indicate that peak demand of the system will increase from 930,000 Kw in 1967-68 to

yearly growth in revenues and in substantial reserves

1,056,000 Kw in 1968-69, 1,194,000 Kw in 1969-70

Looking Ahead

NUMBER OF CUSTOMERS

SALES OF ELECTRICITY - KWH

Thousands

Millions of KWH

700

5.000

Other

Industrial Commercial Residential

Fiv(al

59

*60

'61

*62

*63

*64

*65

*66

*67

"BS*

Yrars

Years • F stimale

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

and 1,349,000 Kw in 1970-71. It is expected that over 30,000 new customers will be added yearly. To meet this demand, the Authority's generating capacity will be raised to a name plate rating of 2,118,340 Kw

by June 1971.

During the period from July 1, 1967 through June

30, 1971, it is anticipated that the Authority will invest $328,946,000 in further capital improvements.

Of this amount, the sale of bonds will provide some $229,324,000. About $97,742,000 or 30% will be

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

earnings and contributions during the last twenty

* Fslimate

Source. P H.W.R A Financial Reports

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

years. The remainder of $1,880,000 will be available

charges on whatever portion of the extra capacity

from previous bond issues.

It will be noted that the capital improvement pro

that remains unsold during the period 1971 to 1974

gram shows a substantial increase over the next four

up to a limit of $3,250,000 during each of these four years. Such amounts would be deducted from the

years. The reason for this is that the Authority has

contribution in lieu of taxes payable to the Common

found it necessary to increase the size of the gener

wealth Government.

ating units scheduled for 1971 and 1972 to 400 MW to serve large metallurgical processors, thus exceed

tal expenditures actually made during the past twenty

The above four-year program compares with capi

Puerto Rico Water Resources Authority

Condensed Balance Sheet As of December 31, 1967

ASSETS

NET UTILITY PLANT:

Gross utility plant Less accumulated provision for depreciation

$585,120,926 103,151,516

Net utility plant

$481,969,410

OTHER PHYSICAL PROPERTY

174,836

BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS

15,239,751

CURRENT ASSETS:

Funds and working advances

$ 26,063,827

Accounts receivable — Less Reserve for uncollectible accounts

20,411,005

Materials and supplies

18,550,760

Prepayments, special deposits, etc

940,234

65,965,826

$ 11,621,214 1,413,471

13,034,685

DEFERRED DEBITS:

Debt discount and expense in process of amortization Other TOTAL ASSETS

$576,384,508

LIABILITIES

CONTRIBUTED CAPITAL

$ 40,945,306

UNAPPROPRIATED NET REVENUES

66,694,532

LONG-TERM DEBT:

Electric revenue bonds Notes payable

$374,703,000 24,800,000

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

2,482,228

401,985,228

CURRENT LIABILITIES:

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

$ 13,394,652 4,550,578 6,237,325 5,684,790

Other

4,513,802

DEFERRED CREDITS

34,381,147

219,034

RESERVES:

Self-insurance

$

7,018,913

Injuries and damages

2,872,075

Revenue stabilization

1,272,093

Appropriated sinking fund TOTAL LIABILITIES

20,996,180

32,159,261 $576,384,508

Puerto Rico Water Resources Authority

Condensed Statements of Revenues and Expenses (For Revenue Fund Purposes per Trust Indenture)

Twelve Months Ending June 30

June 30

June 30

June 30

December 31

1964

1965

1966

1967

1967

$65,864,594 1,501,989

$72,952,446 1,644,048

$83,734,015 1,890,939

$93,232,606 2,085,113

$ 98,838,076 2,124,739

$67,366,583 970,985

$74,596,494 1,182,929

$85,624,954 1,369,968

$95,317,719 1,420,789

$100,962,815 1,503,559

$68,337,568

$75,779,423

$86,994,922

$96,738,508

$102,466,374

$ 9,358,232 18,304,172 8,871,283 879,071

$10,709,138 19,894,285 9,339,608 750,520

$12,035,637 22,518,518 10,717,943 1,045,519

$13,671,019 25,011,077 11,840,030 1,010,175

$ 15,059,377

$37,412,758

$40,693,551

$46,317,617

$51,532,301

$ 55,219,448

penses (per Trust Indenture) . . $30,924,810

$35,085,872

$40,677,305

$45,206,207

$ 47,246,926

$ 8,162,797

$ 8,426,525

$ 9,061,921

$ 9,555,562

$ 10,081,313

4,299,656

4,631,960

5,992,000

5,710,000

6,085,500

REVENUES:

Sales of electric energy . .

Other operating revenues . .

Total operating revenues Other income

Total revenues CURRENT EXPENSES:

Operation — Fuel

Other operating expenses Maintenance

Other current expenses. .

Total current expenses

26,522,477 12,813,961 823,633

Balance of revenues after current ex

SINKING FUND PAYMENTS:

Interest account (exclusive of interest charged to construction and reimburse ment from the Commonwealth Govern

ment of Puerto Rico)

Bond redemption account (exclusive of reimbursement

from

the

Common

wealth Government of Puerto Rico) .

1,466,002

220,116

207,304

207,304

426,965

Total sinking fund payments . . . $13,928,455

$13,278,601 $21,807,271

$15,261,225 $25,416,080

$15,472,866 $29,733,341

$ 16,593,778 $ 30,653,148

Reserve account

Balance

$16,996,355

TRANSFERS TO:

General reserve fund — provision for selfinsurance

$

Renewal and replacement fund .

Reserve for improvements Total transfers

640,668 $ 678,078 $ 730,902 $ 824,926 $ 8,384,582 12,397,814 14,617,510 12,393,200 —

—

—

5,160,000

859,281 9,665,301 8,170,425

$ 9,025,250

$13,075,892

$15,348,412

$18,378,126

$ 18,695,007

$ 7,971,105

$ 8,731,379

$10,067,668

$11,355,215

$ 11,958,141

Balance available for contributions in

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

7,212,100

7,989,345

10,827,675

9,172,130

10,213,261

$

759,005

$

742,034

$

895,538

$ 1,141,954

$

1,130,466

Transfer to sinking fund reserve account $ Balance transferred to unappropri

379,503

$

371,017

$

447,769

$

570,977

$

565,233

379,502

$

371,017

$

447,769

$

570,977

$

565,233

Balance PROVISION FOR:

ated net revenues

$

years, distributed as follows: steam production plant $206,947,000, nuclear production plant $6,080,000,

to create certain reserves. Rates must also provide for the making of deposits required by the Trust

hydraulic production plant $36,241,000, gas turbine production plant $14,166,000, transmission plant $72,865,000, distribution plant $167,568,000 and

Indenture to the credit of the General Reserve Fund

other facilities $74,735,000 for a total of $578,602,000.

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 weU 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

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

TOTAL REVENUES, BALANCE AFTER CURRENT EXPENSES, AND DEBT SERVICE REQUIREMENTS Millions of Dollars

REVENUE FROM SALES OF ELECTRICITY Millions of Dollars

no

110

90

Total Revenues

80

I

I Balance After Current Expenses -

Residential

Debt Service Requirements 70

60

iiii|ili|i| 1 1111 Fiscal

59

'60

Years

• Estimate Including Fuel Oil Adjustment ooufce P.R.W.R A Financial Reports

10

'Estimate Including Fuel Oil Adjustment Source: P.R.W.R.A Financial Reports

I i|i|

10,000 Kw turbo-jet "power pack" jor peaking and emergency generation, San Juan Steam Plant.

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

United States; only a House of Delegates was elected by the People of Puerto Rico.

Over succeeding years strong feeling developed for

companies to qualify them to do business in Puerto

a more autonomous form of government and in favor 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 su&age for local pur

Rico. The bonds are rated "A" by Moody's Invest ment Service and by Standard and Poor's.

In the credit history of Puerto Rico, its municipali ties, authorities, agencies and other political sub divisions, there is no known record of default or de linquency in the payment of principal of or interest

poses. It also provided that members of both Senate and House were to be elected by the people, but the Executive and Judicial branches remained under

on any obligation, nor has there been any forced or "managed" refunding of maturing bonds to avoid

control of Washington through appointment by the

default.

President.

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

as Governor. In 1947 the Jones Act was amended to

Puerto Rico came under United States sovereignty by

permit Puerto Ricans to elect their own Governor,

the Treaty of Paris on December 10, 1898. The Con gress of the United States provided for a civil govern ment for the Island in 1900. It provided for a Gov ernor, a Cabinet, a Senate and a Supreme Court

Judiciary, all appointed by the President of the

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 Congress

enacted Public Law 600, approved July 3, 1950. This

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

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

the Supreme Court of the United States, in the same

Organic Act which define the political, economic and

manner and under the same terms and conditions as

fiscal relationship between Puerto Rico and the United

writs of error and appeals may be taken from other

States shall remain in full force and shall be there after known as the Puerto Rican Federal Relations

Federal and State courts.

Act. It also authorized the People of Puerto Rico to

draft and approve theh own constitution. The Con stitution was drafted by a freely elected constitutional

convention, overwhelmingly approved 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.

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

San Juan Steam Plant unit No. 9 with a Name

Plate Rating of 100,000 Kw. A similar unit is scheduled

for completion in March 1968.

With these additions the plant will have a total capacity

of 578,000 Kw.

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 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 governments 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.

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

fiii^

Sail Juan's changing skyline.

and Sewer Authority. Air and sea port facilities are administered by the Ports Authority, and major highway construction is financed by the Highway

(1) With Commonwealth attaining 60-40 margin over Statehood there can be no question about the

Authority. The bonded debts of these public corpora tions, with the exeeption of the Highway Authority,

ulated strong and consistent economic growth.

(2) With only 4,248 votes in favor of Indepen

are supported entirely by revenues derived from their operations. Bonds issued by the Highway Authority will be supported by a portion of the

dence out of over 700,000 votes cast, there can not be the slightest doubt that Puerto Rieo is an integral

gasoline tax.

1967 Plebiscite

In a speeial plebiscite held July 23, 1967, the people of Puerto Rico strongly reaffirmed their desire to continue their present Commonwealth form of government permanently associated with the United States. Almost two-thirds (66.3%) of all registered

voters participated and a clear expression of the will of the majority of the people is shown in the results below.

425,132 (60.4%)voted to continue Commonwealth Status

274,312 (39.0%)voted to request Statehood

4,248 ( 0.6%)voted to seek Independence

The results of the plebiscite demonstrate two sig nificant factors concerning the political status of Puerto Rico.

continuation of the favorable climate which has stim

part of the United States with permanent American citizenship for Puerto Ricans.

The recent plebiscite had its origin in 1962 in a

petition to the Congress of the United States by the Puerto Riean Legislature requesting a settlement of the future political status of Puerto Rico and pro

posing the submission to the vote of the people the status formulas of Commonwealth, Statehood, and

Independence. In response to the petition, the Con gress approved a bill in 1964 providing for the establishment of a United States-Puerto Rico com

mission to study all the factors involved. The mem bership 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 Rep resentatives, and six appointed by the Governor of Puerto Rico. The Commission concluded that the

people of Puerto Rico should decide which status

they preferred and, in December. 1966, the Puerto

Rican Legislature passed an act providing for the holding of the plebiscite. Any subsequent plebiscites

Commonwealth Oil Refinery.

on the political status of Puerto Rico can be autho rized only by act of Congress or of the Puerto Rican Legislature.

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

now insignificant, minority party favors indepen dence. Both major parties hold maintenance of per manent ties with the United States as a basic princi

ple, and differ only as to the form which that future political relationship should take.

Expansion and Diversification of the Economy of Puerto Rico Economic growth in Puerto Rico since 1940 has been very rapid. Gross product of the Common wealth has increased more than 11 times over its

1940 level and has more than doubled during the past eight years. In the year ended June 30, 1967 gross product totalled an estimated $3,360 million, representing an increase of 10.6% over the prior year.

Net income of the economy has increased from a level of $225 milhon in 1940 to $2,775 miUion in

1967. Income, measured in current prices, has shown an average increase during the last five years of about 10.1% compounded annually and in the year ended June 30, 1967 it increased by 9.9%. Per capita net income is now $1,037 compared to $121 in 1940.

The Commonwealth Government's program of industrialization has aided the economy to shift from one principally agricultural to one much better diver

sified between industry and agriculture. Concurrently

with the expansion in net agricultural income from $71 million in 1939-40 to about $183 million in

1966-67, manufacturing income increased from $27 million to $678 million, substantially surpassing agri culture as a source of income.

Puerto Rican manufacturing has been increasingly diversified during the last two decades. In 1939-40 the manufacture of sugar products accounted for 35% of manufacturing income. By 1966-67 about 4.5% of manufacturing income resulted from this

industry. Manufacturing income is now generally derived from the production of new types of manu factured commodities, principally for shipment to the United States. Such shipments amounted to only $23 million in 1948-49. By 1966-67 they had reached a total of about $926 million.

These new products cover a wide range such as

apparel, petroleum derivatives, and electronic prod ucts. Large, heavily capitalized manufacturing opera tions have shown a significant increase in recent years as compared to those labor-intensive operations promoted during the early part of the industrializa tion program. These include the Union Carbide & Chemical Corp., which operates a $53 million glycol plant and has recently constructed a $22 million plant to produce alcohol intermediates. Union Car bide Food Products Incorporated, a subsidiary of Union Carbide Corporation, will build a $15 mil lion plant at Barceloneta, Puerto Rico for the pro duction of food casings. Food casings are used by meat processors in producing sausage and other processed meats. The new plant is due to be in operation by 1970. Union Carbide Caribe, Inc.,

another subsidiary of Union Carbide, began petro chemical operations on the Island in 1959.

Caribbean Gulf Refining Co. which recently com pleted an expansion program, operates a petroleum refinery.

Petrochemicals are of greatly increasing impor tance to the economy of the Commonwealth, a recent development being the addition of a $41 million aromatic plant to Commonwealth Oil Refining Com pany's $105 million refinery. Corco has invested $180 million in Puerto Rico in the past ten years and the present plans call for increasing the com pany's investments to approximately $300 million by 1970. It is anticipated that the joint venture proj ects will probably add another $75 million by 1970.

Commonwealth Oil Refining Company also an nounced that it plans to build, with Foster Grant Co., Inc., a monostyrene plant at Penuelas with a capac ity of 400 million pounds annually. This would be the first plant in Puerto Rico for production of mono styrene which is the base material in the manufacture of polystyrene, other thermoplastics and synthetic

Helicopter placing two conductors simultaneously.

Helicopters have helped to speed construction of rural lines.

rubber. This plant is scheduled for completion in early 1970.

In addition to the monostyrene facility, the joint project provides for a second plant to produce

ethylbenzene by synthesis as feedstock for the mono styrene plant. This would supplement the supply of ethylbenzene manufactured by Styrochem Corpora tion, Corco's wholly owned subsidiary which has be gun production in its new $5.5 million plant.

Feedstock for the monostyrene plant would also include benzene from Corco's aromatics plant and ethylene from the $55 million Corco-Pittsburgh Plate Glass Company olefins plant which is sched uled for completion in mid-1969.

Another addition to Puerto Rico's petrochemical

complex involves the Puerto Rico Chemical Com pany which has constructed a $6 million phthalic anhydride plant.

Phillips Puerto Rico Core, Inc. has already inau

gurated its Guayama plant at a cost of $58 million.

The company has announced its plans of investing $600 million in petrochemicals over a ten-year

period. One of the first industries to be established is a joint venture with Rhone-Poulenc for manufacturing nylon. The Phillips refinery will constitute the nucleus of a complex of satellite plants producing raw mate rials, intermediates, and consumer goods using petro leum derivatives.

Food processing has also been a significant growth area in recent years. Three rice miUs 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, and with one additional

plant under construction the Island has become one of the leading suppliers of canned fish in the United States market. A soybean processing plant producing

cake for the growing cattle and dairy industry, and oil for the domestic market and for the tuna canner

ies was also established. A subsidiary of Libby, Mc

Neill 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 manufac

turing of dessert preparations and baking powder.

Further, many of the plants promoted by the Eco nomic Development Administration are branches or subsidiaries set up by such firms as General Electiic,

Power Planning Committee of the Authority discussing plant expansion, with Rafael V. Urrutia, Executive Director, presiding.

Consolidated 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, International Shoe, National Cash Register, Hercules Powder, Stanley Works, Pepsico, W. R. Grace, Ford

Motor Co., Phillips Petroleum, Babcock and Wilcox, Cutler-Hammer, Endicott Johnson, Jonathan Logan, Motorola, RCA and Westinghouse.

Underlying Puerto Rico's growing and changing economy there has been a steady expansion in invest ment. Gross fixed investment during the last five consecutive fiscal years, 1963-1967, ran at the high rate of almost 25% of gross product. It has increased from $112 million in 1950 to $884 million in 1967.

Inflowing long-term U.S. capital rose from $31 mil lion in postwar 1947 to an estimated $393 million in 1967.

The Puerto Rican people have benefited greatly from the economic expansion achieved since 1940.

Life expectancy has increased from 46 years to 70 years and the death rate has declined from 18.4 per

thousand to 6.1 per thousand at present, which is now about the same as the U.S. average. The birth rate has declined from 39.0 per thousand in 1940 to 27.9 per thousand in 1967. The people are better educated, with literacy increased from 68.5% to about 86% at present. School enrollment has in creased to about 87% of school age population. In stitutions of higher learning have also expanded rapidly. University and college enrollment which was only 5,000 in 1940, now has 45,131 students.

It is significant that the Commonwealth Govern ment has in the last three years directed approxi mately 46% of its expenditures to education and health.

The Commonwealth Government will continue to

provide a climate inducive to further economic development and growth. Thus it is expected that in the years ahead a sustained rate of economic growth can be maintained. Present projections indi cate that gross product in terms of current prices should reach $7,391 milhon in 1975. This will mean

a personal income per capita of $1,791.

PUERTO RICO WATER RESOURCES AUTHORITY San Juan, Puerto Rico

The Community We Serve Approximate Times Increased or

(Decreased)

An Expanding Economy:

1940

1950

1967

Over 1950

Gross Product — $ Millions

287

755

3,360

4.5

Net Income — $ Millions

225

614

2,775

4.5

Personal Income Per Family — $

611

1,500

4,816

3.2

73

319

2,187

6.9

17

51

346

6.8

312

459

3,150

6.9

2

28

161

5.8

Banks:

Debits — $ Millions

Private Savings Accounts — $ Millions .

Assessed Value of Taxable Property — $ Millions Income Tax Collections — $ Millions .

A More Balanced Economic Life:

Percentage

Per cent of Net Income from:

Change

Points

Manufacturing Agriculture Commonwealth and Municipal Government.

12

14.5

31

24.3

6.6

8

11.4

13.9

24.4

9.9

(17.7) 2.5

Trade

12

16.6

17.8

1.2

Other

37

33.2

37.3

4.1

Per Cent of Exports from: Exports by New Factories* Sugars (Raw and Refined)

14.0

70.1

62

51.1

7.3

(43.8)

38

34.9

22.6

(12.3)

—

Other

A Healthier, Better Educated Population:

56.1

Per Cent

Change

Population

1,869,000

2,211,000

2,708,000

Birth Rate — Per Thousand

39.0

40.9

27.9

(31.8)

Death Rate — Per Thousand

18.4

10.5

6.1

(42.0)

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.

22.5

46

47.1

70.0

48.6

286,000

408,000

651,000

59.6

5,000

12,497

45,131

261.1

ovTiu N T

AO ASTRA PER