Puerto Rico Water Resources Authority (nov 1971)

November 1971

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Water Resources

Authority

COMMONWEALTH OF PUERTO RICO

Government Development Bank for Puerto Rico SAN JUAN, PUERTO RICO

PUERTO RICO WATER RESOURCES AUTHORITY

1950 - Our Growth -1971 Data for the twelve months ended Times

June 30, 1950

Sales of electricity (Kwh) Revenues from sales Customers (number) .

June 30, 1971

Increased

411,727,000

7,268,393,000

17.7

$ 11,170,000 177,000

$ 150,269,000 718,000

13.5 4.1

2,419 65.64

10,305 213.05

4.3 3.2

519,014,000 96,230

8,513,300,000 1,294,500

16.4 13.5

140,560

1,733,840

12.2

Revenues (total) $ 11,317,000 Current expenses $ 5,390,000 Balance of revenues available for debt service . . $ 5,927,000

$ 156,042,000 $ 91,224,000 $ 64,818,000

13.8 16.9 10.9

$

15,520,000

13.2

51,583,000

14.0

Average sales per customer (Kwh) Average revenue per customer

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

Contributions in lieu of taxes

$

$

1,178,000

$

Other contractual obligations

3,681,000

Contractual obligations (total)

$ 4,859,000

$

67,103,000

13.8

$ 55,572,000 25,371,000

$ 700,674,000 207,155,000

12.6 8.2

Electric plant (at cost)

$ 80,943,000

$ 907,829,000

11.2

Long term debt and outstanding notes

$ 60,545,000

$ 654,231,000

10.8

Equity of the people of Puerto Rico

$ 24,905,000

$ 196,239,000

7.9

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

ON THE COVER Linemen working on transmission lines.

Commonwealth of Puerto Rico PUERTO RICO WATER RESOURCES AUTHORITY

Governing Board Chairman: DR. ANTONIO SANTIAGO VAZQUEZ Vice-Chairman: RAFAEL NEVARES Members; JORGE CAMUNAS

RAFAEL MACHARGO DEL RIO Governor Luis A. Ferre

RAFAEL MARTINEZ GIRALT

Officers

Principal Officers

RENAN COLON

FELIX CORDOVA DIAZ

Chief Engineer

Executive Director JAVIER CUEVAS BENITEZ JULIO NEGRONI

General Manager — Services and Supply

Vice Executive Director RAFAEL REYES GARCIA DR. MODESTO IRIARTE

General Manager — Irrigation Services

Assistant Executive Director — Electrical Planning, Construction and Research

JOSE VILA RUIZ

General Counsel

JOSE ISMAEL DIAZ

ANTONIO BUSCAGLIA

Assistant Executive Director — Finance

CARLOS VELAZQUEZ TORO Assistant Executive Director — Power Operations RAFAEL VAZQUEZ COLON Assistant Executive Director — Industrial Relations

Head, Production and Transmission Division HUMBERTO CORDERO

Head, Distribution and Sales Division WILLIAM CANDELARIO

Head, Electrical Planning and Research Division

and Personnel

JOSE A. MATOS

Head, Power Design and Construction Division JOSE B. CANDELAS

Trustee

Controller

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

LOUIS ROIG Treasurer

JULIO C. MUNIZ

Head, Purchasing Division

Consulting Engineers Jackson and Moreland Division

JUAN RAMOS VELILLA Head, Personnel Division

of United Engineers and Constructors Inc.

CARLOS E. LUBE

Head, Industrial Relations Division HECTOR M. MORALES

Auditors

Head, Transportation and Services

Arthur Andersen & Co.

DAVID BRAVO, JR. Public Relations Officer

CARLOS RIVERA ABRAMS

Bond Counsel Mitchell, Petty & Shetterly

Manager, Computer Center and Data Processing

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Puerto Rico

Felix Cordova Diaz Executive Director

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

Rico Water Resources Authority, an autonomous 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 —the Puerto Rico Irrigation Service, which built its first generating plant in 1915, and the Utilization of

tion Bootstrap." By 1956, for the first time in Puerto Rico's history, net income from manufacturing sur passed that from agriculture. Today over 1,800 new

factories, promoted under the economic development program, are in operation. Such rapid growth and profound change in the basic character of the econ omy has created a continuous and rapid rise in the demand for energy.

Throughout the elapsed thirty years since

Water Resources of Puerto Rico, created in 1927. In

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

1941, the Authority was established by law to replace

shown on the inside of the cover page speak for

the Utilization of Water Resources and ensure a

themselves.

growth in the supply of electricity which would be 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

From its inception the Authority has had to con stantly add new capacity to keep up with, and antici

States Government as an emergency measure and

thority's generating plant has risen from 64,440 Kw to the present capacity of 1,733,840 Kw. Annual capital construction expenditures in recent years have reached as high as $123.8 million.

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

gation services were integrated into the Authority's

pate, the mounting demand for electric power. New

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

The capital construction program for 1971-72 is

When the Authority began operations in 1941, the

estimated at $118.0 million. It includes work on the fifth and sixth units of the South Coast Plant

Island's economy was primarily agricultural and heavily dependent on a single crop—sugar. In the

Other important projects included in the program

system.

latter half of that same decade, an industrialization

program for the Island was begun as part of "Opera

which will have a capacity of 410,000 Kw each. are Units No. 1 and 2 of 450,000 Kw each at a new steam plant under construction in Aguirre. In addi-

tion to these fossil units the program includes the first stage of construction of the 600,000 Kw nuclear

plant in Aguirre and several jet and gas turbine peaking units throughout the system.

This program also includes general transmission and distribution facilities, rural electrification proj

ects, the acquisition of land and the construction of buildings, and other miscellaneous improvements.

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

rating of 1,733,840 Kw and a dependable capacity of 1,850,320 Kw. The physical plant presently consists of twenty-four generating stations, of which fifteen are hydroelectric, four are thermalelectric, one is diesel and four are jet peaking units.

Thermal-electric facilities now supply about 97 per

cent of the electric energy generated. The Author

ity's four main generating stations had a total in stalled name plate rating of 1,538,000 Kw as of September, 1971.

in the United States as is indicated by the following Thermal-electric Stations

tabulation:

City of Los Angeles Puerto Rico City of Seattle Department of Water Resources Department of Water and Power

Authority

Lighting

As of

As of

As of

Dec,31,1970

Dec. 31,1970

Dec. 31,1970

Net Plant

$1,369,349,073

Electric Revenues .... I 216,783,519

Number of Customers..

1,100,172

702,889

^

oiftfifin

258,880

Present Electric System

The total installed generating capacity of the Author ity at the end of September, 1971 had a name plate

The Palo Seco. Steam Plant, near San Juan was . . io<;ri cinH has an installed placed m service m 1960

canacity of 627,000 Kw in two 216,000 Kw, two

S 500 Kw steam-electric units and two ]et peaking

uSts Kw and 10,000 Kw, respectively. units of ui 20,000 ,' bv a kerosene-

These units, which ate

burning aviation type jet motor. ^ ing and for emergencies, bemg

Two 410,000 Kw units are being added to our South Coast Steam Plant near Ponce to meet the increasing

demand for industrial power in southern Puerto Rico. In the background is the Commonwealth Oil Refining Company.

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PUERTO RICO WATER RESOURCES AUTHORITY OOiOOOAVA

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matic synchronization to the line from a cold start in only two minutes.

The South Coast Steam Plant, near Ponce, has two 44,000 Kw, two 82,500 Kw steam-electric units

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

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

Oil Refining Co. To meet the increasing demand for industrial power in Southern Puerto Rico two 410,000 Kw thermal units are being added to this

plant and are expected to be in service by April 1972 and 1973, respectively.

The San Juan Steam Plant has an installed ca

SYSTEM

The Mayaguez Plant is equipped with two gas turbine generators whose rated capacity is 20,000 Kw each. The main purpose of these turbines is to handle peak loads. A 10,000 Kw jet peaking unit was also installed increasing the capacity of this plant to a name plate rating of 50,000 Kw. There is now under construction another steam

plant at Aguirre in the southeastern region of Puerto Rico. Initially, this plant will have two 450,000 Kw units which are scheduled to be placed in service in December 1973 and July 1974, re spectively.

In addition to the jet peaking units located at

plant sites, the Authority has in operation five jet power pack units throughout the system.

Five additional 40,000 Kw gas turbine generators

pacity of 598,000 Kw in four 20,000 Kw, two

will be installed throughout the system as follows,

44,000 Kw, four 100,000 Kw steam-electric units and two jet peaking units with a combined capacity

two in 1971, two in 1972 and one in 1973.

of 30,000 Kw.

gency purposes on the island of Vieques.

There is a small 1,000 Kw diesel plant for emer

Nuclear Power Station

Construction of a nuclear power plant of 600,000 Kw was started in 1971 at Aguirre in the municipal ity of Salinas at a cost of $140,000,000. The new plant, which can operate continuously without re fueling for periods of more than a year, wiU provide electric energy suiiicient to serve more than 200,000 middle income homes. It is expected that the plant will be in operation in 1976. The nuclear plant does not emit fumes and it is safe and clean in its op erations. Thus, it contributes directly to the con trol and limitation of air pollution. The Aguirre plant has a greater capacity than any other in op eration today and will be the largest in Latin America.

Hydroelectric Stations There are 15 hydroelectric plants with a total in

stalled capacity of 104,840 Kw. Eleven of these plants have reservoirs which permit regulation of plant output by collecting and storing water inflows during the rainy season for utilization during the dry season, and the remaining four operate on run-ofthe-river flows. Ten of the hydroelectric plants are non-attended and fully automatic.

Transmission and Distribution Systems

The Autlrority's transmission system consists of 1,721 circuit miles of 115 Kv and 38 Kv lines, controlled and sectionalized at 138 substations and sectionalizer stations, with a total name plate trans-

A new distribution center located at

Bayatnon ivai designed to provide the required facilities for the technical section of that office.

Hum

former capacity of 2,660,425/3,977,875 Kva lo

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

Distribution facilities include 231

substations

owned by the Authority with a capacity of 1,339,052/1,956,416 Kva which, supplied from the transmission network, convert the electric power for distribution at 2,400/4,160 Y; 4,800/8,320 Y;

and 7,620/13,200 Y volts through istribution feeders which traverse all the island. In addition, there are 251 privately-owned distribution and in

terchange substations with a total capacity of 744,786/861,614 Kva to serve industrial custom

ers, making a total installed capacity of 2,083,838/ 2,818,030 Kva.

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

By law, the Commonwealth Government contrib utes to the Authority the annual amounts required to 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 any lawful means, including the power of eminent domain.

Rural Electrification

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

tween the Authority and the Rural Electrification Administration of the United States, the Authority has borrowed to date $78,040,000 on bonds bearing interest at the rate of 2% under a loan contract now

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

For many years the Authority has followed a pol icy of initially financing the construction of facilities under its Capital Improvement Program with short term bank loans. From time to time, issues of reve

nue bonds are sold for the repayment of such loans and for the continuance of construction. In this way the facilities producing income for the support of long-term obligations are to a large extent already in

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

(June 30)

1945-46

(^ousands of Dollars)

$

Revenue

Maximum Peak

Average

Kilowatt

per

Revenue

(Million

Customers

Load

Load

Hours per

Kilowatt

Kwh)

(End of Period)

(Kw)

(Kw)

Customer

Hour

per Customer

63,000

39,000

$.0223

$ 46.13

124,959

5,764

258.6

185,090

109,000

69,000

2,638

.0266

70.27

314,853

210,000

129,000

2,956

.0271

80.08

2,069

1950-51

13,006

488.2

1955-56

25,216

930.8

1956-57

28,693

1,078.4

338,685

249,000

153,000

3,184

.0266

84.72

1957-58

33,973

1,298.8

363,032

272,000

181,000

3,578

.0262

93.58

92.79

1958-59

35,781

1,421.6

385,592

314,000

198,000

3,687

.0252

1959-60

40,441

1,667.4

408,671

355,000

231,000

4,080

.0243

98.96

1960-61

45,304

1,892.4

435,019

398,000

261,000

4,350

.0239

107.34

1961-62

50,846

2,145.4

459,995

439,000

294,000

4,664

.0237

113.44

1962-63

57,520

2,465.6

487,991

498,000

335,000

5,053

.0233

121.20

1963-64

65,865

2,858.4

517,682

560,000

388,000

5,522

.0230

130.85

1964-65

72,952

3,186.3

552,111

637,000

436,000

5,771

.0229

132.13 144.03

1965-66

83,734

3,771.7

581,369

737,000

506,000

6,488

.0222

1966-67

93,233

4,291.8

608,462

825,000

575,000

7,053

.0217

153.23

1967-68

104,271

4,894.8

635,155

939,000

657,000

7,706

.0213

164.17

760,000

8,585

.0208

178.83

1968-69

118,883

5,707.0

664,770

1,078,000

1969-70

132,773

6,495.3

690,725

1,185.000

861,000

9,565

.0204

195.52

1970-71

150,269

7,268.4

717,996

1,295,000

972,000

10,305

.0207

213.05

SALES OF ELECTRICITY - KWH

Thousands

Uillicns of KBH

NUMBER OF CUSTOMERS

875

I

I Other

â&#x2013;Ą Industrial

E3 Commercial Residential

Fiscal

'62

'63

'64

'65

'66

'67

'68

'69

'70

'71

Years

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

'62

'63

'64

'65

'66

'67

'68

'69

'70

'71

Source: P R W R A Financial Reports

operation by the time such obligations are issued.

Bonds outstanding, including the REA issues, amounted to $633,753,000 as of July 31, 1971.

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 June 30, 1971, a total of $921,205,000 was invested in capital improvements.

Of this amount $678,919,000 has been provided

from the net proceeds of bond issues and bank bor rowings, and $242,286,000 had come mainly from net revenues of and contributions to the Authority.

On June 30, 1971, total net assets amounted to

$928,660,000, operating and appropriated reserves were $42,541,000, contributed capital and unappro priated net revenues were $155,786,000 and out standing debt was $576,614,000.

Total revenues for the twelve months ended

June 30, 1971, were $156,042,000. Current ex

Higher costs, including increased fuel oil prices and higher interest rates on bond issues have all had an adverse effect on the financial position of the Au

thority. The Executive Director recommended to the Governing Board inclusion in the Authority s rate structure of adjustment clauses to compensate for in crease in fuel oil prices and the cost of money over

the 1969 averages, and to insure a balance in the Revenue Stabilization Reserve equivalent to 3% of

the Authority's annual gross revenues. On March 27, 1971 the Governing Board appointed three persons

to act as Hearing Officers to hold public hearings and make recommendations on the rate adjustments

proposed by the Executive Director. The Hearing

Officers, after holding public hearings on April 28, 29 and May 12, informed the Board that they were not then in a position to make their final recommen dations on the rate adjustments but recommended

that a temporary increase of 11% applicable to all

penses were $91,224,000, leaving a balance of

rates then in force be made effective June 1, 1971.

$64,818,000 available for debt service requirements and other contractual obligations. The maximum

erning Board that it was imperative that the previous

debt service for any future year on outstanding issues was $35,759,000, indicating a coverage of 1.83 times on present debt. Accruals for contributions to the Commonwealth and municipal governments

in lieu of taxes amounted to $15,520,000 during the same period.

The Executive Director then informed the Gov

rate schedule be increased and the Governing

Board, at meetings held on May 26, 1971 and June 14, 1971, authorized an 11% increase to be ap

plied to all bills for electric energy consumed on

and after June 1, 1971. As a result of this 11% rate increase, it is estimated that 1971-72 revenues

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The new generating facilities under construction at Aguirre on the southeastern coast will comprise two 450,000 Kw each steam units and a 600,000 X'u' nuclear unit.

will increase by $20,406,000, not including the in crease resulting from normal growth. It should be noted that the balance available as of July 31, 1971 for debt service including the present issue only

New Bond Issue

In November 1971, the Authority proposes to sell $50,000,000 Electric Revenue Bonds for the purpose

The projected revenue increases for the following two years have been calculated to produce some

of liquidating a portion of 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 $42,836,000

what less than an 11% increase ($17,052,000 for 1972-73 and $20,278,000 for 1973-74) to provide

and will be covered about 1.55 times by net earnings for the twelve months ended July 31, 1971.

includes the effect of the rate increase since June 1, 1971.

for the possibility of future revision in the rate structure based on the formula of adjustments to

rates as originally proposed by the Authority.

Under the terms of Executive Order No. 11615

issued by the President of the United States on

August 15, 1971, further increases in rates were prohibited for 90 days. The Authority cannot predict the impact, if any, of any further regulations which may be adopted by the United States after the expira tion of this 90-day period.

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 1,294,500 Kw in 1970-71, 1,679,000 Kw in 1971-72, 2,021,000 Kw in 197273, 2,259,000 Kw in 1973-74 and 2,637,000 Kw in

1974-75. It is expected that about 30,000 new customers will be added yearly. To meet this de mand, the Authority's generating capacity will be raised to a name plate rating of approximately 3,100,000 Kw by 1973.

During the period from July 1, 1971 through June 30, 1975, it is anticipated that the Authority will invest $521,778,000 in further capital improve ments. Of this amount, the sale of bonds will pro vide some $379,836,000. About $136,932,000 or 26% will be derived principally from revenues of the Authority. The remainder of $5,010,000 will be available from previous bond issues.

Under the above Capital Improvement Program, there has been a substantial increase in planned ex penditures for the four year period 1972-75 both to take care of normal expansion and, in addition, to provide power for certain heavy, capital intensive industries, at prices based on the incremental cost of power of the larger units to be installed. Since these plans are expected to be the core of industrial complexes which will foster general economic devel opment, the Authority under special agreements

feasible for the Authority, the Legislature of Puerto Rico approved Law #82 of 1967, as amended by Law 140 of 1968, which guarantees to reimburse the Authority for any part of the annual charges on whatever portion of the extra capacity that remains unsold during the period of 1971 to 1974 up to a limit of $3,250,000 during each of these four years.

It also guarantees the reimbursement, (effective after 1974, and for a period of not more than six years), of the resulting difference between the cost of the fuel used to generate the power sold to said industries computed on the average price of the fuel used in our system and that resulting if com puted on the basis of a unitary price of 24 cents per 1,000,000 BTU up to a limit of $3,000,000 during any year of the period. Such amounts would be deducted from the contribution in lieu of taxes pay able to the Commonwealth Government.

with the Commonwealth Government is willing to

The above four-year program compares with capital expenditures actually made during the past twenty-four years, distributed as follows: steam production plant $359,565,000, nuclear production $7,288,000, hydraulic production plant $37,280,000, gas turbine production plant $27,850,000, trans

provide power at prices based on the incremental cost of power of the larger units. In order to make

$253,805,000 and other facilities $124,885,000, for

the construction of the larger units economically

a total of $921,205,000.

mission

plant $110,532,000, distribution

REVENUES FROM SALESOF ELECTRiCITt'

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

Millions of Dollars 200

Total Revenues

1

i Balance After Current Expenses

- V////X Debt Service Requirements

Source- P R W R A Financial Reports

Residential Total

plant

Puerto Rico Water Resources Authority

Condensed Balance Sheet June 30, 1971

ASSETS

NET UTILITY PLANT:

Gross utility plant

Less accumulated provision for depreciation

$907,829,375

147,825,746

Net utility plant

$760,003,629

OTHER PHYSICAL PROPERTY

511,379

BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS . . . .

20,158,037

CURRENT ASSETS:

Funds and working advances Accounts receivableâ&#x20AC;&#x201D;Less Reserve for uncollectible accounts

Materials and supplies Prepayments, special deposits, etc

$ 45,453,838 45,486,180 34,973,581 3,086,485

129,000,084

DEFERRED DEBITS:

Debt discount and expense in process of amortization Other

$ 16,315,862 2,671,266

TOTAL ASSETS

18,987,128

$928,660,257

LIABILITIES

CONTRIBUTED CAPITAL

$ 51,755,083

UNAPPROPRIATED NET REVENUES

104,030,644

LONG-TERM DEBT:

Electric revenue bonds

Notes payable

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

$576,614,000

75,000,000

2,616,549

654,230,549

CURRENT LIABILITIES:

Accounts payable

$ 29,006,606

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

7,430,690 12,926,466 15,519,570

Other

11,219,480

76,102,812

RESERVES:

Self-insurance

Injuries and damages

$ 10,332,301

2,087,580

Revenue stabilization

Appropriated sinking fund Plant improvements TOTAL LIABILITIES 10

29,982,742 138,546

42,541,169 $928,660,257

Puerto Rico Water Resources Authority

Condensed Statements of Revenues and Expenses (For Revenue Fund Purposes per Trust Indenture) Twelve Months Ending June 30 1970

June 30 1971

June 30 1969

June 30 1968

REVENUES:

Sales of electric energy . . .

Other operating revenues . .

$104,270,618 2,111,965

$118,883,451 2,206,614

$132,772,966 2,247,954

$150,269,449 2,899,580

Total operating revenues

$106,382,583 1,781,295

$121,090,065 2,007,086

$135,020,920 2,583,051

$153,169,029 2,873,419

$108,163,878

$123,097,151

$137,603,971

$156,042,448

$ 15,434,275

$ 18,948,372 38,434,344

$ 28,631,826 40,680,954

17,748,857

852,709

20,519,673 1,391,877

Other income Total revenues

. . . .

CURRENT EXPENSES:

Operation—

Other current expenses . .

937,572

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

Total current expenses

$ 58,983,457

$ 66,444,644

$ 75,984,282

$ 91,224,330

$ 49,180,421

$ 56,652,507

$ 61,619,689

$ 64,818,118

$ 11,166,209

$ 12,655,428

$ 14,446,737

$ 18,967,304

6,685,000 787,908

7,342,799 1,175,105

8,412,885 1,999,072

9,562,070 2,793,758

$ 18,639,117

$ 21,173,332

$ 24,858,694

$ 31,323,132

$ 30,541,304

$ 35,479,175

$ 36,760,995

$ 33,494,986

$

$

$

Fuel

28,348,610

Other operating expenses

14,263,000

Maintenance

Balance of revenues after current

expenses (per Trust Indenture) . .

SINKING FUND PAYMENTS:

Interest account (exclusive of interest

charged to construction and reimburse ment from the Commonwealth Govern ment of Puerto Rico)

Bond redemption account (exclusive of reimbursement from the Commonwealth of Puerto Rico) Reserve account

Total sinking fund payments . . . .

Balance TRANSFERS TO:

General reserve fund—provision for selfinsurance

$

Renewal and replacement fund Reserve for improvements Total transfers

Balance available for contributions in lieu of taxes, etc

Transfer to sinking fund reserve account .

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

1,226,392 18,895,176 138,546

$ 21,417,109

$ 21,437,448

$ 20,260,114

$ 12,442,797

$ 14,062,066

$ 15,323,547

$ 13,234,872

11,423,274

13,025,787

IN LIEU OF TAXES

PROVISION FOR:

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

$ 18,098,507

PROVISIONS FOR CONTRIBUTIONS Balance

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

$ 1,036,279

^

14,551,153 772,394

$

1,019,523

$

509,762

$

518,140

$

386,197

^

509,761

$

518,139

$

386,197

Balance

15,519,570 ($ 2,284,698) —

($ 2,284,698) 2,284,698

REVENUE STABILIZATION

Balance transferred to unappropriated $

509,761

$

518,139

$

386,197

net revenues

11

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Another gas turbine power block peaking unit under construction at Yabucoa.

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

properties during the same period, must be not less than 150 percent of maximum debt service payable

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

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

pay the principal of and the interest on all bonds issued as they become due, as well as to create

percentage will be reduced to 140.

The bonds and the income therefrom are, under

reserves for such purposes.

provisions of Acts of Congress now in force, exempt

The Authority has also covenanted that it will at

from Federal and State taxation. These bonds are

all times fix and collect reasonable rates and charges

also legal investments for savings banks and trust funds in the state of New York and for savings banks

sufficient for the payment of maintenance and oper to create certain reserves. Rates must also provide

in California and are eligible for deposit by banks in Puerto Rico to secure public funds, and by insurance

for the making of deposits required by the Trust

companies to qualify them to do business in Puerto

ating expenses and bond principal and interest, and Indenture to the credit of the General Reserve Fund

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

and the Renewal and Replacement Fund, and for

Service and by Standard and Poor's.

payments in lieu of taxes to the Commonwealth and

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

the municipalities it serves.

In order for the Authority to issue additional bonds

divisions, there is no known record of default or de

under the Trust Indenture, the average annual bal ance of revenues from its electric properties for the

linquency in the payment of principal of or interest

preceding twenty-four months, after deducting the

"managed" refunding of maturing bonds to avoid

cost of maintaining, repairing and operating these

default.

on any obligation, nor has there been any forced or

THE COMMONWEALTH OF PUERTO RICO General

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 of 2,690,000 according to 1970

census figures. The topography is characterized by a fertile coastal plain rising to interior mountains which run mostly from east to west. San Juan, capital of Puerto Rico, lies some 1,690 miles south east of New York, 3V4 hours by jet plane, and 1,000 miles southeast of Miami, 2V4 hours by jet plane.

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

the same general procedures, as do the fifty federated

government for the Island in 1900. It provided for a Governor, a Cabinet, a Senate and a Supreme

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

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

was superseded in 1917 by the Organic Act or Jones Act, which granted United States citizenship to Puerto Ricans, as well as unrestricted suffrage for

local purposes. It also provided that members of both Senate and House were to be elected by the

people, but the Executive and Judicial branches re mained under control of Washington through ap pointment by the President.

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

States over theirs. It differs from the States primarily

as Governor. In 1947 the Jones Act was amended

in its relationship to the Federal Government. In brief, residents of Puerto Rico do not vote in the

to permit Puerto Ricans to elect their own Governor, who in turn was empowered to appoint his cabinet

national elections and are represented in Congress

and members of the Supreme Court.

only by a Resident Commissioner who has a voice

The next advance toward complete local govern

but no vote in the House of Representatives. On the

ment occurred in 1950 when, in accordance with the

other hand. Federal taxes do not apply in Puerto Rico except by mutual consent, such as social secu rity taxes. No Federal income tax is collected from

gress enacted Public Law 600, approved July 3,

Puerto Rican residents on income earned in Puerto

pact," became effective upon its acceptance by the

wishes of the people of Puerto Rico, the 81st Con 1950. This law, which is "in the nature of a com

Rico and Federal excise taxes collected on exported

electorate of Puerto Rico. It provides that those sec

Puerto Rican products, such as rum and tobacco, are

tions of the Organic Act which define the political,

returned to the Commonwealth Treasury. This rela

economic and fiscal relationship between Puerto Rico and the United States shall remain in full force and

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

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 con

stitution. The Constitution was drafted by a freely elected constitutional convention, overwhelmingly ap Government History

proved in a special referendum, and approved by

Puerto Rico came under United States sovereignty

Congress and the President. It became effective upon proclamation of the Governor of Puerto Rico on

by the Treaty of Paris on December 10, 1898. Th^ Congress of the United States provided for a civil

July 25, 1952.

13

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The Commonwealth Government

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

bicameral legislature are subject to regular election every four years. The Legislature operates xmder 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

of the Supreme Court of Puerto Rico may be taken to the Supreme Court of the United States, in the same manner and under the same terms and condi

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

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 Government and the municipalities.

There is, therefore, no other overlapping taxation or bonded indebtedness payable from taxes. The Commonwealth Government assumes responsibility

for a number of important functions normally per formed by local governments in the Continental United States. Among these are police and fire pro tection, education, all major street construction, and

public health and welfare programs. In addition, the Commonwealth Government supervises municipal fiscal affairs to a very substantial extent.

Administration of Government

The operation of the executive branch of the gov ernment is similar to that in state governments in

general, with separate departments responsible for

major activities, each headed by a secretary who as a group form the Governor's cabinet and who are

appointed by the Governor subject to Senate ap proval. In addition, Puerto Rico has made substantial use of public corporations or agencies which are largely autonomous in their operations in providing specific services. Each is headed by an executive director or president who reports to a board of directors which in turn is appointed by the Governor.

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

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

Among the public corporations are the Water Re sources Authority which provides essentially aU elec tric power on the island, the Aqueduct and Sewer Authority which provides all water and sewage ser vices, the Ports Authority responsible for seaport and airport facilities and the Highway Authority

which is charged with building all major road and highway constructions, all of whose borrowings are secured by revenues produced by the entities, or by gasoline taxes in the case of the Highway Authority.

The Government Development Bank and the Indus trial Development Company likewise are autonomous agencies which, after receiving substantial capital contributions from the Treasury originally, have

subsequently augmented their funds by borrowing on their own credit.

Among other public corporations are the Urban Renewal and Housing Corporation and the Public

Buildings Authority, which provide housing facilities for persons of low and medium incomes and office space for government departments and agencies, respectively. Bonds of each are guaranteed by the Commonwealth government but they are self-sup-

porting in the first instances through receipts of mortgage payments or rentals in the case of low and middle income housing, and from lease payments

from government departments or agencies in the latter case.

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 estab15

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New 230 Kv lines are under construction

to serve the power needs of large industrial consumers.

lishing the present Commonwealth political relation ship.

Since 1948 there have been two major thrusts in

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

political life in Puerto Rico towards close association

more effective government through new leadership.

with the United States and a minor one in favor

Political status did not receive emphasis as an imme

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

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

years.

1952

1956

1960

1964

1968

64.8%

62.5%

62.4°/

59.4%

41.8%

_

_

—

—

10.0%

Commonwealth

Popular Democratic Party Peoples Party

12.9% 25.0% 34.3% 34.6%

New Progressive Party

—

Socialist Party

3-3%

Independence Party Christian Action 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.

Statehood

Statehood Republican Party

recent election, compared with 41.8% of the vote received by the candidate of the Popular Democratic Party. Tn the Legislature, the New Progressive Party

19.0%

12.5%

_

_

0.2%

3.3%

2.7%

3.0%

—

3.3%

—

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

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

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, recognizins the need for funds to bring

issues to the attention of, and to inform the voters, each recognized political party receives from the Commonwealth Treasury a contribution of funds to carry out its political campaign. This contribution is according to a formula based primarily on the party's percentage of votes cast in the most recent

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

to elect candidates to the Legislature, then, under certain circumstances that body is increased in size

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

by formula to assure minority representation. The

Rican Legislature passed an act providing for the

Municipal Law (Act No. 142, approved July 21, 1960) also assures minority representation in the Municipal Assemblies since at least three members

holding of the plebiscite.

election.

And third, Puerto Rican law provides that if a

minority party receives a substantial vote, but fails

of each of these bodies have to be elected from the

minority parties.

This plebiscite, held July 23, 1967, strongly re affirmed the overwhelming desire of the Puerto Rican people to maintain permanent and close ties with the United States. Of the over 700,000 ballots cast (66.3 percent of all registered votes) 99.4 percent were

1967 Plebiscite

for either Commonwealth or Statehood and only 0.6

In 1962 the Legislature of Puerto Rico petitioned

percent for Independence.

the Congress of the United States requesting a plebiscite by the voters of Puerto Rico through which an expression of preference could be demonstrated

Political stability, one of the prime requisites of a sound, attractive investment climate, is outstandingly demonstrated in Puerto Rico. Only a relatively small small minority 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 take.

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.

Gas power block peaking unit located at Vega Baja.

This 40,000 kw unit is presently undergoing performance tests and is expected to enter into commercial operation

by the end of 1971.

m

Expansion and Diversification of the Economy of Puerto Rico Economic growth in Puerto Rico has been very

rapid. Gross product has increased more than 6 times over its 1950 level and has nearly tripled

during the past ten years. In the year ended June 30, 1970 gross product totalled $4,607 million, an increase of 11.7% over the prior year.

Preliminary figures for the year ended June 30, 1971 indicate that net income has increased from

$1,355 million in 1960 to $4,228 million. Measured in current prices, the average increase during the last five years has been 10.8% compounded annu

ally. Per capita net income is now $1,556 compared to $582 in 1960, almost a threefold increase.

The Commonwealth Government's program of industrialization has aided the economy to shift

from a base that was principally agricultural to

greater diversification between industry and agricul ture. Concurrently, with the expansion in net agri cultural income from $149 milhon in fiscal 1950 to

$196 million in fiscal 1971, manufacturing income increased from $89 million to $994 million in 1971.

Puerto Rican manufacturing has become increas

ingly diversified during the last two decades. In fiscal 1940 the manufacture of sugar products accounted for 35% of manufacturing income, while

in 1967 only 4.5% of manufacturing income re sulted from this industry. Manufacturing income is

now generally derived from the production of new types of manufactured products, principally for

shipment to the United States. Such shipments amounted to only $33 million in 1950. By 1971

they had reached a total of $1,500 million.

Arrival of a 544,000 Kv power auto transformer to be installed at the Bayamon Switchyard Center.

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Puerto Rico's west coast is experiencing

industrial growth. Shown here is the Foreign Trade Zone near Mayaguez.

Underlying Puerto Rico's growing and changing economy there has been a steady expansion in in vestment. Average gross fixed domestic investment during the last five consecutive fiscal years, 1966-70,

Great progress has been achieved over the years in education at all levels. Institutions of higher leain-

ran at a rate of 22% of gross product. It has

ing have expanded rapidly. University and college enrollment, which was only 12,000 in 1950, icached 57,000 students in 1970. It is significant that the

increased from $112 million in 1950 to $1,404

Commonwealth Government has in recent years

million in 1970. Inflowing long-term U. S. capital

directed approximately 50% of its expenditures to

rose from $31 million in postwar 1947 to an estimated $774 million in 1970.

education and health.

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

Life expectancy has increased from 61 to 70 years

Credit History

and the death rate has declined from 10.5 per thou

The debt paying record of Puerto Rico is clear of

sand to 6.5 per thousand at present, which is now

default or delinquency. There has never been any

has declined from 39.5 per thousand in 1950 to 24.9

forced or "managed" refunding to avoid default.

A similar debt record exists for all municipalities

per thousand in 1970.

and instrumentalities of Puerto Rico.

about the same as the U. S. average. The birth rate

The first section of the ttew San Jiian-Ponce superhighway, from Ponce to Jiiana Diaz, inaugurated last September. This expressway, the first toll road on the Island, will link the two largest commercial and industrial centers, stimulating industrial growth and the demand for electric power.

STATISTICAL DATA CONCERNING THE ECONOMY OF THE COMMONWEALTH OF PUERTO RICO

Fiscal Years Ending June 30

1950

1955

1960

1965

1966

1967

1968

1969

1970

Population 2,200,000 2,240,000 2,340,000 2,552,000 2,568,000 2,573,000 2,600,000 2,664,000 2,690,000 Gross product—$ millions 755 1,142 1,681 2,748 3,039 3,354 3,738 4,124 4,607 Net income—$ millions ..

614 960 1,355 2,314 2,542 2,789 3,092 3,422 3,821 Exports—$ millions 235 353 622 974 1,155 1,321 1,449 1,606 1,729 Exports by new factoriest —$ millions 33 132 380 643 804 926 1,014 1,156 1,210 Bank debits—$ millions ..

319 418 835 1,661 1,893 1,841 1,715 2,123 2,548

Bank loans—$ millions ....

128

217

450

1,010

1,210

1,220

1,362

1,670

2,041

270

323

562

1,207

1,349

1,556

1,830

2,216

2,561

51

77

152

298

304

346

407

486

553

28

32

63

127

141

162

186

220

250

14

21

32

40

44

48

49

53

58

$ millions Average family income—$

459 1,500

982 2,194

1,643 2,864

2,503 4,292

2,828 4,662

3,150 4,908

3,448 5,254

3,851 5,590

4,066 6,132

Motor vehicles—number ..

61,000

105,000

180,000

319,000

380,000

421,000

470,000

538,000

614,000 672,000

Bank deposits (including governmental)—$ mil

lions Private savings accounts—

$ millions Income tax collections—$

millions Property tax collectionsi

—$ millions Assessed valuation* (real & personal property)—

^

Enrollment in public day

schools

^

431,000

529,000

567,000

618,000

631,000

652,000

659,000

669,000

36

55

132

226

240

228

262

294

324

199 340

253 710

200 1,822

163 3,656

238 4,192

194 4,847

127 5,644

258 6,397

22U 7,32U

Estimated value of build

ing permits issued — $

099

millions Electricity generated§ — millions hours

of

kilowatt-

Hydro Thermal

* As of January 1 of preceding fiscal year.

t Promoted by the Economic Development Administration. Does not include exports of other new factories. $ Commonwealth and Municipal. § Includes purchased power.

Note: Figures shown above are subject to revision from year to year.

Source: Puerto Rico Planning Board.

ASTRA

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