Puerto Rico Water Resources Authority (may 1961)

May 1961

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r

COMMONWF.AITII OF PUF.RTO RICO

Government Development Bank for Puerto Rico SAN JUAN, I'UFRTO RICO

Ua-I 3 0^13 S., /?£> !

B 3-1

COMMONWEALTH OF PUERTO RICO

Puerto Rico Water Resources Authority GOVERNING BOARD

Chairman: Hon. Luis Munoz Marin, Governor of the Commonwealth of Puerto Rico

Vice Chairman: Hon. Francisco Lizardi, Secretary of Public Works

Member: Hon. Luis Rivera Santos, Secretary of Agriculture

OFFICERS

Executive Director: Rafael V. Urrutia

Asst. Executive Director — Programs and Plans: Victor M. Cataldo Asst. Executive Director — Power Operations: Rafael R. Ramirez

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

General Manager of Service and Supply: Felix Cordova Diaz Director of Power Engineering and Construction: Waldemiro Velez Director of Production and Transmission: Carlos Sabater Director of Distribution and Sales: Julio Negroni Director of Personnel: Bryant W. Ruthven Chief Engineer: Pedro Colon Pagan Controller: Jose Ismael Diaz

Acting Treasurer: Adolfo Criscuolo Director of Power Utilization: Vacant General Manager of Irrigation Service: Harold Toro

Director of Public Relations: Guillermo Navarro Fuentes Director of Purchasing: Javier Cuevas Benitez

Safety Officer: Rafael D. Chervoni trustee

The First National City Bank of New York CONSULTING ENGINEERS

Jackson & Moreland, Inc. AUDITORS

Arthur Andersen & Co.

bond counsel

Mitchell, Pershing, Shetteri y & Mi re hei.l

1 061

Democracy in Action in Dynamic Puerto Rico November 8, 1960 was also election day for Puerto Rico. It selected its Governor for the next four years, its Resident Commissioner to the United States Congress, its Senators and Representatives to the Com monwealth Legislature, and its local municipal officials.

The high percentage of voters who went to the polls (83% of those registered) and the high percentage of eligible citizens who registered (84%) demonstrate the vital interest the American citizens of Puerto Rico take in their democratic right to exercise the secret ballot in their political decisions.

Puerto Rico operates, for all practical purposes, under VOTE

BY

PARTIES

(Thousands

a strong two-party system, resulting in firm and stable leadfirship balanced by an effective opposition.

The Popular Democratic Party, with over 58%

the vote, originated and supports the Commonwealth status, believing that, from an economic point of view,

POPULAR DEMOCRATIC

1

and for the best interests of both Puerto Rico and the rest of the United States, any other status would be

1 1956

unrealistic for many years.

The Statehood Republican Party, with 32%, of the vote, favors and promotes establishment of Puerto Rico as the 51st State, and the early attainment of federated

STATEHOOD REPUBLICAN

statehood.

Two minority parties together polled less than 10% of the total vote. The Christian Action Party, fOTme

in I960 with the support of the Catholic Church, se cured less than 7% of the vote. The Independence

Party, favoring an independent republic, reached its

peak in 1952 with 20% of the vote, and has since de

INDEPENDENCE CHRISTIAN

ACTION*

clined to 3% this year.

With each of these two minority parties having less than 10% of the vote, neither will now appear on the 1964 ballot, without first qualifying new signatures

•— 10% of Total Vote

Formed 1960

equal to at least 10% of the total vote cast this year.

Political stability, one of the prime requisites of a sound, attractive investment climate, is outstanding y demonstrated in Puerto Rico. Only a declining, and now insignificant minority party favors independence.

Both major parties hold maintenance of permanent ties with the United States as a basic principle, an differ only as to the form which that future poUtical relationship should take.

Government Development Bank for Puerto Rico Fiscal Agent For The Commonwealth of Puerto Rico

P. O. Box 4591, San Juan. Puerto Rico

45 Wall Street. New York 5. N. Y.

PUER>

5'/7 ^

Rafael V. Urrutia, Executive Director Puerto Rico Water Resources Authority

PUERTO RlOO

Electric power service in Puerto Rico is the responsibility of the Puerto Rico

Water Resources Authority, an autonomous public service corporation created by law in 1941. It is an instrumentality of the Government of the Commonwealth of Puerto Rico, with a Governing Board composed of the Governor of Puerto Rico, the Secretary of Public Works and the Secretary of Agriculture. The Board appoints an Executive Director who, in turn, appoints all other officers and employees and who is responsible for the management and operation of the Authority.

The origin of the Authority goes back to the organization of the Puerto Rico Irrigation Service in 1908, and the subsequent construction of small hydroelectric plants in 1915 and 1922. By 1925 a new agency known as Utilization of Water Resources of Puerto Rico took over to concentrate on meeting the growing need

for hydroelectric power development, and was followed by the creation of the Water Resources Authority in 1941.

During World War 11 the two large private electric power systems on the Island were taken over by the United States Government as a war emergency measure, and their management entrusted to the Water Resources Authority. In 1944 these

systems were purchased by the Authority, the properties of the Puerto Rico Railway, Light and Power Company being acquired for $10,500,000 and the Mayaguez Light, Power and Ice Company for $1,700,000.

Subsequent growth, as shown below, has been impressive.

Net Plant Electric Revenues Number of Customers

$ 34,611,456 $ 80,943,219 $141,341,096 $261,811,492 5,186,618 124,959

11,170,252 185,090

20,108,330 245,058

41,435,522 408,671

The Puerto Rico Water Resources Authority is now exceeded in size by only

one of the publicly owned integrated distributors of electric energy in the United States, as presented in the following tabulation, as of June 30, 1960.

Net Plant

Electric Revenues Number of Customers

City of Los Angeles Dept. of

Water Resources

Water & Power

A uthority

$597,132,995 113,914,195

$261,81 1.492 41,435,522

$213,670,325 36,745,896

926,716

408,671

232,575

Puerto Rico

City of Seattle Department of Lighting

INCREASED ELECTRIC POWER DEMAND

Since its inception in 1941 the Puerto Rico Water Resources Authority has had to constantly build new hydroelectric and thermoelectric plants to keep up with and anticipate the mounting demand for more electric power.

Generation of power has risen twelvefold since 1941. Over 600 new industrial plants have been established as a result of Operation Bootstrap, the name given to the industrialization program instituted by the Government of the Commonwealth some thirteen years ago.

Modern industry in the true sense of the word had been practically non-existent, the Island being primarily an agricultural economy dependent mainly on a single product —cane sugar. In 1956, for the first time, the industrial product in Puerto Rico was higher than agricultural.

The increase in the demand has required that the Authority maintain a constant

program of new construction during the last two decades. Practically every year since 1944 the Authority has placed in service new generating capacity by the construction of hydroelectric developments, or the addition of new thermoelectric plants to its system. Total name plate rating capacity of the Authority in 1944, the year of purchase of the two principal privately owned systems, was 64,440 Kw. Present capacity is 574,920 Kw. Electric power generation by the Authority in fiscal 1944 was 283.7 million Kwhrs compared with 2,021.9 million Kwhrs in 1960.

In the last five years, the extraordinary rate of growth of the Authority has brought it to levels of 598,920 Kw of dependable generating capacity, $45 million in annual revenues, 3,600 employees and a $31 million capital construction program.

PUERTO

RICO

WATER

RESOURCES

AUTHORITY

ELECTRIC SYSTEM FCBRUARY Za.lMI

PALO^ seco

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isab'ela plants

QARCCLOMETA

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n^64{ COAMO N0_ 3.750

22{;juana Diaz

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RAMBLA

CARiTE PLANTS

SZOOPOO

•SOO

l£00 KV*

SANTA ISABf L -

LEGEND

□ STEAM plants () STEAM PLANTS (Undtf Ccnflrociic

16 dV ELECTRIC transmission LINES 38 KV ELECTRIC TRANSMISSION LINES CaoUrxld) EXISTING 115 KV Electric transmission lines

O HTORO-ELECTHIC PLANTS

115 KV ELECTRIC TRANSMISSION LINES lUndf Contuse

A INTERCONNECTING SUBSTATIONS

reservoirs

A SUBSTATIONS

ii

u

N

..4 i Btc

INVESTMENT STATUS

Moody's Rating Standard & Poor's Rating

A A

Legal Investments for Savings Banks and Trust Funds in the State of New York

Between 1955 and 1958 the Authority grew at the rate of 20 percent annually.

The impact upon the economy of the recession in the United States reduced this rate in fiscal year 1958-59 but in fiscal year 1959-60 it had recovered to a growth rate of 17 percent.

The capital construction program for the current 1960-61 year has been estimated at $31,493,000. It includes new construction such as completion of the second unit of 82,500 Kw which began operation in February, 1961 in the new Palo Seco Steamelectric Station near San Juan. This plant has been designed for an ultimate capacity of one million kilowatts.

Other construction includes: completion of the second 20,000 Kw gas turbine unit on the west coast at Mayaguez and construction of an 82,500 Kw unit in the South

Coast Steam-electric Station; rural electrification projects, general transmission and distribution facilities, the acquisition of land and construction of buildings and other miscellaneous items. When present construction is completed, thermoelectric generating capacity will be in excess of 650,000 Kw. Total power production in Puerto Rico in the twelve months ended February, 1961, amounted to 2,206 million kilowatt-hours compared with 182 million in 1941 — over a twelvefold growth. The number of customers has risen over four times, from 100,492 in 1941 to 425,231 in February, 1961. Rapid growth of

industrial power consumption, and the sharp rise in the standard of living as

li

reflected by the constant installation of more electric appliances account for the large increase in the use of electric power.

as

PRESENT ELECTRIC SYSTEM

%

Total installed generating capacity of the Authority at the end of February, 1961 had a name plate rating of 574,920 Kw and dependable capacity of 598,920 Kw. The physical plant presently consists of twenty-two generating stations, of which eighteen are hydroelectric and four are thermal-electric generating plants. Thermalelectric facilities now supply approximately 88 percent of electric energy generated.

Fuel oil is delivered directly by pipelines from the Caribbean Refining Co. on the north coast and from the Commonwealth Oil Refining Co. on the south coast to the plants in their areas.

Installing a control panel at the MonaclUa Transmission Center.

,,,bb

bd' BB

«■ «■

*■ 9

f

m

HHH

A

corner

in

Transmission

the

Monacillo

Center

control

-ail

Construction of an addition to the

powerhouse.

South

Coast

Steam-electric Station, to house a third unit, 82,500 KW.

irnl bini

THERMAL-ELECTRIC GENERATING STATIONS

The Authority owns four thermal-electric generating stations with a total installed name plate rating of 466,000 Kw. The Palo Seco Steam Plant, located near San Juan, was placed in service in 1960 and at present has two 82,500 Kw steamelectric units. It is designed for an ultimate capacity of 1,000,000 Kw. The South Coast Steam Plant, near the city of Ponce, has two 44,000 Kw steamelectric units. One of the outstanding features of this plant is that it can burn either low cost refinery pitch or Bunker C fuel oil. A third unit of 82,500 Kw is now under construction and is scheduled for completion in April, 1962.

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

The Mayaguez Steam Plant, the oldest of the four plants in service, was recently equipped with two gas turbine generators with a rated capacity of 20,000 Kw each.

The main purpose of the gas turbines is to take care of peak loads for short duration periods in the daytime. A 5,000 Kw steam-electric unit is held in cold standby.

D. C. Analyzer in the General Office Building of the Water Resources Authoril\.

HYDROELECTRIC STATIONS

There are 18 hydroelectric plants with a total installed capacity of 108,920 Kw. Four hydroelectric plants operate on run of river flows, and the remaining fourteen

GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1940

Fiscal Year

(Thousands

(Million

Customers

Maximum Peak Load

(June 30)

of Dollars)

Kwh)

(End of Period)

(Kw)

(Kw)

139.0 176.2

100,492

183.8

109,352 112,147 117,101 124,959 132,492 144,207 162,133 176,642 185,090

18,000 18,000 47,000 51,000 54,000 63,000

9,000 11,000 28.000 32,000 33.000 39,000

1,926 2,069

70,000 80,000 88,000

45,000

2.239

51.000

2.390

55,000

2,289

98,000 109,000

59.000 69.000

122,000 140.000 155.000 178.000 210.000 249,000

77.000

2,419 2,638 2.897

Sales >

r

1940-41 1941-42,

. .

1942-43

,

3.610

4,163 4,456 4,960 5,187 5,764 7,285 9,280

211.6 225.5

1943-44, , 1944-45 1945-46 1946-47, , 1947-48. , 1948-49 .

10,338

371.1

1949-50

11,170

1950-51 1951-52 1952-53* , 1953-54* ,

411.7 488.2

14,880 16,115 17,825

1954-55'-' 1955-56* 1956-57*

1957-58* 1958-59*

1959-60*

1960-61**

13,006

19.799 25.216 28.693 33,973

35,781 40,441 45,799

258.6 296.7 344.7

565.1

625.3 699.9 774.9 930.8

106,762

195.061 211,567 228.205

245,058 314,853

1.078.4

338,685

1,298.8 1.421.6

363,032 385,592 408.671 433,000

1,667.4

1,918.2

Revenue

Average

Kilowatt

per

Revenue

Load

Hours per Customer

Kilowatt Hour

Customer

1,383

$.0260

$35.93

1.650 1.681

.0236 .0242 .0234

40.75

1,887

87,000

2.955

97,000

3.067

109,000

129,000

3,162 2,956

153.000

3,184

272.000

181,000

314,000

198.000

355,000

231.000

3,578 3,687 4,080

397,000

262.000

4.430

*Includes amount recovered through Fuel Oil Adjustment Clause. *'-'Revised estimate — 8 month actual, 4 month estimated including Fuel Oil Adjustment Clause.

.0230 .0223 ,0246 .0269 .0279 .0271

per

38.99 44.23

44.29 46.13 54.99

64.36 63.76 65.64

.0266 .0263 .0258 .0255

70.27 76.28

.0255

80.79

.0271 .0266 .0262 .0252

80.08 84.72

.0243 .0239

76.17

78.11

93.58 92.79 98.96 105.77

The Puerto

Rico

Water

Re

sources Authority enjoys very satisfactoiy labor relations.

The Executive Director, Rafael V. Urrutia (left) shakes hands with Francisco Martinez, Presi dent of the Union of Workers of the Electrical Industry and Irrigation of Puerto Rico (AFLCIO) which includes all of the operation and maintenance per sonnel of the Authority. Fer nando Torrent, Assistant Exe cutive Director for Industrial Relations and Personnel looks

have reservoirs which permit regulation of plant output by collecting and storing water inflows during the rainy season for utilization during the dry season. Eleven of the hydroelectric plants are non-attended, fully automatic and are operated by remote control.

TRANSMISSION AND DISTRIBUTION SYSTEMS

The Authority's transmission system consists of 1,183 circuit miles of 1 15 Kv and 38 Kv lines, controlled and sectionalized at 84 transmission substations located at

suitable points throughout the system to insure stability of service and provide an appropriate islandwide network from which power is supplied to serve the entire Island.

Distribution facilities include 159 substations owned by the Authority with a capacity of 415,057 Kva, which, supplied from the transmission network, convert

the electric power for distribution at 4,160 volts through distribution feeders which traverse 75 cities and towns and most of the rural area. In addition, there are 96

privately owned distribution substations with a total capacity of 182,860 Kva to serve industrial customers for a combined total installed capacity of 597,917 Kva. NUCLEAR POWER PLANT

A nuclear power plant utilizing a new and advanced type of boiling water reactor and nuclear superheater, with a rated capacity of 16,500 Kw is being constructed in the northwestern tip of Puerto Rico under the terms of a contract between the Authority and the Atomic Energy Commission. The Authority will finance the cost

of the plant site and the conventional generating components at an estimated cost of $3,750,000. The AEC will invest about $11,000,000 in the construction of the nuclear reactor. It is estimated that this plant will be in operation early in 1963.

This project will give the Authority the necessary experience to undertake large scale generation by means of nuclear reactors when it becomes economically feasible.

RURAL ELECTRIFICATION

Through successive negotiated amendments to an original loan contract for $6.4 million entered into in 1952 between the Authority and the Rural Electrifica tion Administration of the United States, the Authority has borrowed to date $50,250,000 at 2% under a loan contract now totaling $52,550,000. These funds were loaned by REA for the construction of generation, transmission and distri bution facilities to serve rural customers. Nearly 63,000 rural families are now being served under this program.

The Commonwealth Government pays to the Authority through appropriate legislation certain annual amounts required to guarantee that the Authority recovers the complete cost of service to customers served under the REA program.

Left to right — Hon. John S. Graham, Commissioner, United States Atomic Energy Commis sion; Hon. Chet Holifield, Mem ber of Congress; Hon. Luis Muhoz Marin, Governor of Puerto Rico and Mr. Rafael V. Urnitia, Executive Director, Puerto Rico

Water Resources

Authority, at ground-breaking

FINANCING THE PROGRAM

The Authority has broad powers under the legislation by which it was created, including the power to borrow money and issue revenue bonds for any of its

ceremony, August 23, 1960, for Puerto Rico's first Nuclear-elec tric Power Plant BONUS.

MILLIONS OF DOLLARS

PUERTO RICO WATER RESOURCES AUTHORITY

REVENUES FROM SALES OF ELECTRICITY

Geodesic dome of BONUS Nu clear-Power Plant in construc

tion. Rincdn, Puerto Rico.

ip Ip III III ill ill III III ill i|l ill ill ill ill

IP ill ill ill III ill III III ill III III ill ill ill III ill FISCAL

1946

1947

1948

1949

1950

1951

1952

1953

1954

1955

1956

1957

1958

YEARS

* Revised Estimate — 8 Month Actual, 4 Month Estimated Including Fuel Oil Adjustment Clause.

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

1959

1960

1961*

PUERTO RICO WATER RESOURCES AUTHORITY

CONDENSED BALANCE SHEET

AS OF FEBRUARY 28, 1961

ASSETS

GROSS UTILITY PLANT

$316,009,991

Less provision for accumulated depreciation

39,442,605

NET UTILITY PLANT

$276,567,386

OTHER PHYSICAL PROPERTY & MORTGAGE RECEIVABLES

1,206,655

BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS

14,191,460

CURRENT ASSETS:

Funds and working advances

$ 11,881,598

Accounts receivable

7,011,966

Materials and supplies

7,898,539

Prepayments, special deposits and other

1,133,387

27,925,490

DEFERRED DEBITS:

Debt discount and expense in process of amortization

$

Other

5,059,529 798,055

TOTAL ASSETS

5,857,584 $325,748,575

LIABILITIES CONTRIBUTED CAPITAL

$ 31,406,313

UNAPPROPRIATED NET REVENUES

27,343,137

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

239,838,000

CURRENT LIABILITIES:

Accounts payable Customers' deposits and accrued interest

$

Accrued contributions in lieu of taxes

4,172,950 1,710,741 1,216,779 3,254,900

Other

2,107,238

Accrued interest on Electric Revenue Bonds

12,462,608 402,624

DEFERRED CREDITS RESERVES: Self-insurance

Hydro-production equalization Revenue stabilization

Appropriated sinking fund Reserve for injuries and damages TOTAL LIABILITIES

$

2,610,445 471,259

1,086,994 9,505,245 621,950

14,295,893

$325,748,575

PUERTO RICO WATER RESOURCES AUTHORITY

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

TWELVE MONTHS ENDING June 30 1957

REVENUES:

June 30 1958

June 30 1959

June 30 1960

February 28 1961

$28,693,447 531,419

$33,973,281 707,694

$35,780,765 811,338

$40,440,678 994,844

$43,673,975 1,093,975

$29,224,866 635,436

$34,680,975 659,622

$36,592,103 363,432

$41,435,522 638,016

$44,767,950 736,195

.

$29,860,302

$35,340,597

$36,955,535

$42,073,538

$45,504,145

$ 5,702,454 8,095,091 2,928,220 404,484

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

$ 5,851,898 10,755,756 4,165,602

$ 6,364,024

Other operating expenses .

351,265

12,135,940 3,913,749 423,207

$ 6,606,571 13,162,431 4,104,394 385,661

$17,130,249

$20,925,865

$21,124,521

$22,836,920

$24,259,057

$12,730,053

$14,414,732

$15,831,014

$19,236,618

$21,245,088

$ 2,955,274

$ 3,535,363 1,898,402 509,893

$ 4,764,979 2,101,488

$ 5,226,952

$ 5,775,052 2,770,578 913,541

Sales of electric energy. . .

Other operating revenue . .

Total operating revenues Other income Total revenues .

.

.

CURRENT EXPENSES:

Operation— Fuel

Maintenance

Other current expenses Total current expenses .

Balance of revenues after current

expenses (per Trust Indenture) SINKING FUND PAYMENTS:

Interest account (exclusive of interest

charged to construction and reim bursement from the Commonwealth

Government of Puerto Rico)

Bond redemption account

1,781,532 321,517

.

Reserve account

Total sinking fund payments

651,812

2,549,700 856,675

$ 5,058,323

$ 5,943,658

$ 7,518,279

$ 8,633,327

$ 9,459,171

$ 7,671,730

$ 8,471,074

$ 8,312,735

$10,603,291

$11,785,917

$

$

$

$

$

TRANSFERS TO:

General reserve fund — provision for self-insurance

Renewal and replacement fund Total transfers

289,789 3,574,557

328,783 3,921,141

4,399,653

367,316

4,831,232

446,036 5,502,701

397,119

$ 3,864,346

$ 4,249,924

$ 4,766,969

$ 5,228,351

$ 5,948,737

$ 3,807,384

$ 4,221,150

$ 3,545,766

$ 5,374,940

$ 5,837,180

3,140,048

3,721,366

3,919,491

4,429,208

4,781,564

373,725) $

945,732

$ 1,055,616

$

472,866

$

527,808

Balance available for contribution

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

$

667,336

$

499,784 ($

$

333,668

$

249,892

PROVISION FOR:

Transfer to sinking fund reserve account Revenue stabilization

Total

—

—

$

373,725

—

—

$

333,668

$

249,892

$

373,725

$

472,866

$

527,808

$

333,668

$

249,892

$

—

$

472,866

$

527,808

Balance transferred to unappropri ated net revenues

( )Denotes credit.

BONDED DEBT NOW OUTSTANDING

GENERAL MARKET ISSUES Amount

Coupon by Maturity Range Original Issue

$50,000,000

25,000,000 21,000,000

12,500,000

22,000,000

25,000,000

20,000,000

20,000,000

Outstanding

First Call

Date

From

To

Int. Rate

Amount

Date

Price

Jan. 1/47

July 1/61 Jan. 1/66 Jan. 1/74

1965

2.75%

1973

2.50%

1977

2.70%

5 7,695,000 16,087,000 9,358,000

Jan. 1/50

104%

$ 33,140,000

July 1/61 Jan. 1/81

1980 1984

2.75% 2.80%

10,959,000 10,425,000

July 1/53

104%

21,384,000

July Jan. Jan. Jan.

1/61 1/71 1/81 1/84

1970 1980 1983 1988

4.30% 4.60% 3.75% 4.75%

1,100,000 2,020,000 1,555,000 15,825,000

July 1/58

105%

20,500,000

July 1/61 Jan. 1/70 Jan. 1/83

1969

1982 1990

3.00% 3.25%

855,000 2,490,000 8,850,000

Jan. 1/60

103%

12,195,000

July July July July July July July

1/61 1/63 1/66 1/71 1/76 1/82 1/90

1962 1965 1970 1975 1981 1989 1993

3.40% 3.50% 3.60% 3.70% 3.75%

140,000 245,000 485,000 560,000 975,000 I,845,000 17,555,000

July 1/61

104%

21,805,000

Jan. 1/62 Jan. 1/66 Jan. 1/70

1965

5.00%

1969 1975

3.50%

Jan. 1/65

104%

24,690,000

Jan. 1/65

104%

July 1/66

104%

July 1/50 July 1/53

Jan. 1/55

July 1/56

Jan. 1/58

Jan. 1/59

Jan. 1/60

3%% 3.00%

3.25%

Jan. 1/76 Jan. 1/80 Jan. 1/86

1979 1985 1995

3.75% 3.90% 4.00% 4.10%

Jan. Jan. Jan. Jan. Jan.

1/62 1/67 1/70 1/84 1/91

1966 1969 1983 1990 1996

5.00% 3.75% 4.00% 4.10% 4.20%

Jan. Jan. Jan. Jan. Jan. Jan.

1/62 1/66 1/78 1/84 1/90 1/96

1965 1977 1983 1989 1995 1997

5.00% 4.00% 4.10% 4.20% 4.30% 4%%

Feb. 28, 1961

665,000 760,000 1,410,000 1,150,000

2,120,000 18,585,000 625,000 450,000

3,030,000 2,320,000 13.470,000

19,895,000

630,000

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

Total General Market Issues

20,000,000

$173,609,000

RURAL ELECTRIFICATION ADMINISTRATION ISSUES ^ 1,000,000 2,000,000 2,000,000 2,000,000 2,400,000 2,500,000 9,200,000 2,800,000

2,400,000 2,500,000 17,200,000 4,250,000

July July July July July July July July July

1/52 1/53 1/54 1/55 1/56 1/57 1/57 1/58 1/58

July 1/59 Jan. 1/60 July 1/60

July July July July July July July July July

1/61 1/61 1/61 1/61 1/61 1/61 1/61 i/61 1/61

Jan. 1/62 July 1/62 Jan. 1/63

1987 1988 1989 1900 1991 1992 1992 1993 1993 1994 1995 1995

2.00% 2.00% 2.00%

Anytime

s

852,000 1.752,000

1.800,000

2.00% 2.00% 2.00%

1.846,000 2,270,000

2.00%

2,419,000 8.900.000

2.00% 2.00% 2.00%

2,765,000 2,375,000

2.00%

17,200.000 4,250.000

2.500.000

2.00%

Total R. E. A. Issues

Total Outstanding

to

100%

48.929,000

{222,538,000

corporate purposes and to secure the payment of such bonds under a Trust Inden ture. It has full authority to set and collect adequate rates and other charges for the use of its facilities, as well as having complete control and supervision over its properties and activities. Properties may be acquired by the Authority by any lawful means, including the power of eminent domain.

For many years the Authority has pursued a policy of obtaining short-term bank loans for the purpose of constructing facilities under its Capital Improvement Pro gram; from time to time, issues of revenue bonds are sold for the repayment of such loans and for the continuance of construction. In this way the facilities pro ducing income for the support of long-term obligations are to a large extent already in operation by the time such obligations are issued. Bonds outstanding, including the REA issues, totaled $222,538,000 as of February 28, 1961.

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 February 28, 1961, a total of $282,270,987 was invested in capital improvements; of this amount $223,053,367 had been provided from bank borrowings and the proceeds of bond issues, and $59,217,620, or about 21 percent, had come mainly from net revenues of and contributions to the Authority. On February 28, 1961, total assets amounted to $325,748,575, operating and appropriated reserve were $14,295,893, net contributed capital and unappropriated earnings were $58,749,450, and outstanding debt was $239,838,000.

Total revenues for the twelve months ended February 28, 1961 were $45,504,145.

Current expenses for the same period were $24,259,057, leaving $21,245,088 to

Typical 5,000 KVA distribu tion stibstation, 115/8-4 KV (dales, Puerto Rico).

meet debt service requirements. The maximum debt service for any future year on outstanding issues was $10,790,868, indicating a coverage of 1.98 times on present debt. Payments to the Commonwealth and municipal governments in lieu of taxes

amounted to $4,429,208 in the fiscal year 1959-60. During the rapid expansion of facilities and improvement of service over the past decade, the Authority's rates have not been raised; constant increases in demand have consistently resulted in yearly growth in revenues and substantial reserves, adequate to meet its operating expenses and contractual obligations.

In May, 1961, the Authority will issue $22,000,000 par value of electric revenue bonds, from which $18,400,000 of current bank borrowings will be retired and about $3,600,000 will be made available for new construction.

Puerto Rico's continuous indus

trial growth keeps the Author SECURITY FOR THE BONDS

Bonds issued by the Authority under the Trust Indenture are payable from the Puerto Rico Water Resources Authority Sinking Fund, into which Fund the Author

ity has covenanted to deposit a sufficient amount of its revenues, after expenses for maintenance and operation of its electric properties, to pay the principal of and the interest on all bonds issued as they become due. as well as to create reserves for

such purposes.

The Authority further covenants to fix reasonable rates and charges suificient for

the payment of maintenance and operating expenses and bond principal and inter est, and to create certain reserves. In addition the rates must provide for the making of deposits required by the Trust Indenture to the credit of the General Reserve Fund and the Renewal and Replacement Fund, and for payments in lieu of taxes to the Commonwealth and the municipalities it serves.

In order to issue additional bonds under the Trust Indenture, the Authority

ity busy providing additional electrical facilities. Above, the new Bayunidn transmission cen ter. 12 miles from San Juan.

PUERTO RICO WATER RESOURCES AUTHORITY

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

50,000,000 -

I TOTAL REVENUES I BALANCE AFTER

t •:::•

I CURRENT EXPENSES debt service REQUIREMENT

1960

FISCAL

1961*

YEARS

* Revised Estimate — 8 Month Actual, 4 Month Estimated Including Fuel Oil Adjustment Clause.

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

must demonstrate that the average annual net revenues of its electric properties for

the preceding twenty-four months, after deducting the cost of maintaining, repairing and operating such properties during such period, have been not less than 150

percent of maximum debt service payable in any succeeding fiscal year including

T>

the proposed issue.

The Authority's bonds are exempt as to interest from Federal and State income taxation under existing laws, and are specifically exempted from Commonwealth taxation. There has never been any delay in payment of the obligations of the

Authority when due, nor in those of the Commonwealth and its municipalities and agencies.

LOOKING AHEAD

Operations hnilding, Monacillo Trunsntission Center, San Jnan, Puerto Rico.

Continuous studies of power needs, constantly reviewed and revised by the Author

ity and its consulting engineers, now indicate that peak demand on the system will increase from 397,240 Kw in 1960-61 to 464,452 Kw in 1961-62, 542,716 Kw in 1962-63 and 618,161 Kw in 1963-64. It is expected that over 20,000 new customers will be added yearly, and the annual system load factor is expected to increase to

67 percent as a result of introduction of further new heavy industrial equipment.

To meet this demand, the projected name plate rating generating capacity of the Authority will be raised to approximately 765,660 Kw by 1964.

During the period from July 1, 1960 through June 30, 1964, it is anticipated that the Authority will invest $1 12,200,000 in further capital improvements. Of this

amount, the sale of bonds will provide some $67,300,000, while about $35,400,000, or 32%, will be derived principally from revenues of the Authority, and the remainder of $9,500,000 will be available from previous bond issues.

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

Hydraulic Production Plant . . .

Gas Production Plant

$102,015,384 35,753,730 8,307,096

Transmission Plant

37,120,265

Distribution Plant

74,415,391

Other Facilities

24,659,121

Double line stringing by heli-

Total

$282,270,987

oopter in Puerto Rico. (115 KV transmission.) The Puerto Rico ]^atcr Resources Authority orig inated this operation by heli copter.

THE COMMON WEALTH OF PUERTO RICO

Puerto Rico is the fourth largest of the islands in the Caribbean area. It is about 100 miles long and 35 miles wide, having an area of 3,423 square miles and a population estimated at 2,350,000 as of June 30, 1960. The topography is charac

terized by a fertile coastal plain rising to interior mountains which run mostly from east to west. San Juan, Capital of Puerto Rico, lies some 1,600 miles south of New York, 3'/i hours by jet plane, 1,065 miles southeast of Miami, 2Vi hours by jet plane.

Under its compact with the United States, the Commonwealth of Puerto Rico exercises virtually the same control over its internal affairs, and with the same general procedure, as do the fifty federated States over theirs. It differs from the

States primarily in its relationship to the Federal Government. In brief, Puerto Rico does not vote in the national elections. It is represented in Congress only by a Resident Commissioner who has a voice but no vote in the House of Representa tives. On the other hand. Federal taxes do not apply in Puerto Rico except by mutual consent, such as social security taxes. No Federal income tax is collected from Puerto Rican residents on income earned in Puerto Rico and Federal excise

taxes collected on exported Puerto Rican products, such as rum and tobacco, are returned to the Commonwealth Treasury. This relationship with the Federal Govern ment is defined through the medium of the compact entered into by Congress and the People of Puerto Rico, and is further described hereafter.

GOVERNMENT HISTORY

Puerto Rico came under United States sovereignty by the Treaty of Paris on Decem

ber 10, 1898. The Congress of the United States provided for a civil government for the Island in 1900. It provided for a Governor, a Cabinet, a Senate and a

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

Over succeeding years strong feeling developed for a less colonial form of government and in favor of United States Citizenship. The original Act was super

seded in 1917 by the Organic Act or Jones Act, which granted United States citi zenship to Puerto Ricans, as well as unrestricted suffrage for local purposes. Both Senate and House were elected by the people, but the Executive and Judicial branches remained under control of Washington through appointment by the President.

No further change occurred until 1946 when the President for the first time appointed a Puerto Rican as Governor. In 1947 the Jones Act was amended to permit Puerto Ricans to elect their own Governor, who m turn was empowered to appoint his Cabinet and members of the Supreme Court.

The next advance toward complete local government occurred in 1950 when, in accordance with the wishes of the People of Puerto Rico, the 81st Congress enacted

Public Law 600, approved July 3, 1950. This law which is "in the nature of a compact," became effective upon its acceptance by the electorate of Puerto Rico It provides that those sections of the Organic Act which define the political, economic and fiscal relationship between Puerto Rico and the United States shall remain in full force and shall be thereafter known as the Puerto Rican Federal Relations Act. It also authorized the People of Puerto Rico to draft and approve their own constitution. The Constitution was drafted by a freely elected constitu tional convention, overwhelmingly approved in a special referendum, and approved

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

THE COMMONWEALTH GOVERNMENT

The Constitution recognizes and assures a separation of powers among the executive,

legislative, and judicial branches as in the Federal Constitution, and in those of the States. Both the Governor and the bicameral legislature are subject to regular •• • ..rA'A *•' • ' '1 1

rrv

it -'iij;" • i.

election every four years. The Legislature operates under standard parliamentary and legislative rules. The judicial system, administered by a Supreme Court appointed for life, is composed of lower and intermediate courts. Writs of error and appeals entered by the District Court of the United States for Puerto Rico and appeals from the Supreme Court may be taken to the United States Court of Appeals for the First Circuit, and to the Supreme Court of the United States, as provided by law.

Another view of the Bayainon Transmission Center.

Governmental responsibilities assumed by the Commonwealth are greater than those normally assumed by a State government. Municipalities which combine both rural and urban areas are the only local political subdivisions and are comparable to counties in scope. The only units of government with the right to levy ad valorem taxes are the Commonwealth Government and the municipalities. There is, there

fore, no other overlapping taxation or bonded indebtedness payable from taxes.

The Commonwealth Government assumes responsibility for a number of important functions usually performed by local governments in the continental United States.

Among these are police and fire protection, education, all major street and highway construction, and public health programs. In addition, the Commonwealth Govern ment supervises municipal fiscal affairs to a very substantial extent.

Commonwealth and municipal governments are relieved of most of the respon-

- '*1

The modern Monacillo Trans mission Center in San Jiian.

Lines from the 19 hydro and 4 steam-electric stations of the Authority converge at this point.

,i^

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

GENERAL

The Capital of Puerto Rico is the city of San Juan, located on an excellent natural harbor in the northeastern section and served by a modern airport which handled over 1,400,000 passengers and over 25,000 tons of air freight last year. Industrial development has advanced rapidly in the San Juan metropolitan area which includes several cities adjoining the Capital and has a population of about 600,000. San Juan is also the site of the University of Puerto Rico and the center of Common wealth and Federal Government offices.

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

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

northwest, both important for food processing and apparel production. Ramey Air Force Base, the most important air defense installation of the United States in the Caribbean, is located near the city of Aguadiila, also on the western coast.

EXPANSION AND DIVERSIFICATION OF THE ECONOMY

Economic growth in Puerto Rico since 1940 has been very rapid. Net income of the economy has increased from a level of $225 million in 1940 to $1,311 million in 1960. Output of the economy, measured in terms of gross product adjusted for price changes, has shown an average increase of about 5.1% compounded annually.

The Commonwealth Government's program of industrialization has aided the

economy to shift from one principally agricultural to one much better diversified between industry and agriculture. Concurrently with the expansion in net agri cultural income from $70 million in 1939-40 to $177 million in 1959-60, manu

facturing income increased from $27 million to $289 million, surpassing agriculture 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 1959-60, about 10 percent of manufacturing income

resulted from this industry. Manufacturing income is now generally derived from the production of new types of manufactured commodities, principally for shipment to the United States. Such shipments amounted to only $20 million in 1947-48. By 1959-60 they had reached a total of about $369 million.

These new products were manufactured in some 635 modern plants as of February, 1961, and cover a wide range, such as apparel, petroleum and electronic products. Large, heavily capitalized manufacturing operations have shown a signifi cant increase in recent years as compared to those labor intensive operations pro moted during the early part of the industrialization program. These include two petroleum refineries with investments of over $70 million, an $8 million W. R.

Grace paper and paper board plant, recently acquired by the International Paper Company, the $28 million glycol plant of Union Carbide and Chemical Corp., and a $5 million flour and feed mill. Two large tuna fish canneries are in operation and a third is under construction, while a new industrial type slaughterhouse has been inaugurated recently. Further, many of the plants are branches or subsidiaries set up by such firms as General Electric, Consolidated Cigar Corporation, Sunbeam Corporation, American Can Company, Phelps Dodge Corporation, Sperry Rand Corporation, Weston Electric Co., Carborundum Corp., Sprague Electric, Van Camp Sea Food, Van Raalte, B.V.D. Corp., and W. R. Grace Company, U. S. Rubber Co., Parke, Davis & Co., Inc., Borden Co., and California Packing Corp.

Underlying Puerto Rico's growing and changing economy there has been a steady expansion in investment. Gross fixed investment during the four consecutive fiscal years 1957 to 1960 ran at the high rate of 21% of gross product. Inflowing long term U.S. capital rose from $30 million in postwar 1947 to an estimated $175 million in 1960 when it equalled 54% of the $323 million fixed investment registered in that year.

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

PUERTO RICO WATER RESOURCES AUTHORITY San Juan, Puerto Rico

The Community We Serve Fiscal Years

An Expanding Economy:

1940

1960(1)

% of Increase

1,311.3

482.0

Net Income — Millions of Dollars

225.3

Net Income Per Capita — Dollars

121.0

565.0

366.9

Gross Product — Millions of Dollars

286.7

1,573.0

448.7

92.7

621.0

569.9

17.6

177.2

906.8

311.8

1,763.8

465.7

26.3 166.0

252.0

858.2

2,022.0

1,118.1

25.1

Commercial Banks:

Total Bank Assets — Millions of Dollars

Savings and Time Accounts — Millions of Dollars

Assessed Value of Taxable Property — Millions of Dollars Recurrent Revenues of the Central Government

— Millions of Dollars'-' Power Generation — Millions of KWH

.

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

2,350,000

Birth Rate — Per Thousand

39.0

31.5

19.2*

Death Rate — Per Thousand

18.4

6.6

64.1*

Population'-^'

Life Expectancy — Years Public Day School Enrollment

State University and College Enrollment

46.0

68.0

47.8

286,113 4,987

573,000

100.3

18,000

260.9

A More Balanced Economic Life:

Percentage Points

Percent(%)of Net Income from:

Change

Manufacturing Agriculture Commonwealth and Municipal Government

12.0

22.1

10.1

31.0

13.5

17.5*

9.0

13.0

4.0

Trade

12.0

17.8

5.8

Other

36.0

33.6

2.4*

62.0

20.3

41.7*

38.0

79.7

41.7

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

"I Preliminary figures prepared by the Puerto Rico Planning Board.

Includes Federal Grants in Aid. i:ti Decennial Census.

* Deerease.

ovAtNT

AO ASTRA PER ASPERA