Professional Documents
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Demanda UTIER vs. Genera
Demanda UTIER vs. Genera
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UNITED STATES DISTRICT COURT
DISTRICT OF PUERTO RICO
In re:
In re:
THE FINANCIAL OVERSIGHT AND
MANAGEMENT BOARD FOR PUERTO RICO
as representative of
PUERTO RICO ELECTRIC POWER AUTHORITY,
PROMESA Title III
Debtor
Case No. 17 BK 4780-LTS
1
The Debtors in these Title III Cases, along with each Debtor’s respective Title III case number and the last four (4)
digits of each Debtor’s federal tax identification number, as applicable, are the (i) Commonwealth of Puerto Rico
(Bankruptcy Case No. 17-BK-3283-LTS) (Last Four Digits of Federal Tax ID: 3481); (ii) Puerto Rico Sales Tax
Financing Corporation (Bankruptcy Case No. 17-BK-3284-LTS) (Last Four Digits of Federal Tax ID: 8474); (iii)
Puerto Rico Highways and Transportation Authority (Bankruptcy Case No. 17-BK-3567-LTS) (Last Four Digits of
Federal Tax ID: 3808); (iv) Employees Retirement System of the Government of the Commonwealth of Puerto Rico
(Bankruptcy Case No. 17-BK-3566-LTS) (Last Four Digits of Federal Tax ID: 9686); (v) Puerto Rico Electric Power
Authority (Bankruptcy Case No. 17-BK-4780-LTS) (Last Four Digits of Federal Tax ID: 3747); and (vi) Puerto Rico
Public Buildings Authority (Bankruptcy Case No. 19-BK-5523-LTS) (Last Four Digits of Federal Tax ID: 3801) (Title
III case numbers are listed as Bankruptcy Case numbers due to software limitations).
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COMPLAINT
TABLE OF CONTENTS
Plaintiff in the above styled Adversary Proceeding, by and through the undersigned attorneys, and
PRELIMINARY STATEMENT
1. Once more, UTIER is forced to come before this Court on behalf of its members which are
employees of the Puerto Rico Electric Power Authority (“PREPA”). UTIER’s latest challenge
comes in the form of the execution of the Puerto Rico Thermal Generation Facilities
Operation and Maintenance Agreement dated as of January 24, 2023 by an among the
Puerto Rico Electric Power Authority as owner, the Puerto Rico Public -Private
OMA is a contract signed by PREPA, the Public-Private Partnerships Authority (“P3”), and
2. Under the OMA, Genera will assume full control of the generation functions and assets of
PREPA, with hurricane season once again upon us. The execution of the OMA results in the
further displacement of PREPA’s workforce and new complications and obligations for
3. The OMA is an illegal transaction which does not pass muster under Puerto Rico law. The
OMA contains clauses and general transactions which are contrary to law and public order.
These clauses and transactions make the contract null and void, which makes it non-existent.
Thus, the OMA is invalid, and Plaintiff has standing to seek a declaratory and injunctive relief
to that effect.
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THE PARTIES
4. Plaintiff, UTIER, was founded in the early 1940´s and it is one of four labor unions that has
represented PREPA’s employees and retirees. Its members include workers employed to work
directly in PREPA’s power plants. UTIER’s job is to protect and defend PREPA’s workers, as
well as negotiate collective bargaining agreements on their behalf. UTIER also represents the
branch of its retirees. UTIER is a creditor in PREPA’s restructuring under Title III of
PROMESA.
5. Defendant Puerto Rico Electric Power Authority (“PREPA”) is a public corporation and
instrumentality of the Commonwealth, created pursuant to Act No. 83 of May 12, 1941 (“Act
83” or “PREPA Organic Act”). It is the public electric utility in Puerto Rico and provides
energy to approximately 1.5 million customers, which makes it one of the largest public
utilities in the United States. While there are some private generation plants connected to the
grid, PREPA is responsible for almost 70% of the generation capacity in Puerto Rico. Under
the OMA, PREPA is the “Owner”. Defendant, the Financial Oversight and Management Board
for Puerto Rico (“FOMB”) is the financial oversight board imposed on Puerto Rico pursuant
to the Puerto Rico Oversight Management and Economic Stability Act (“PROMESA”). The
FOMB has been included in this adversary complaint as representative of PREPA in its Title
pursuant to Act No. 29-2009 (“Act 29”). Under Act No. 120-2018 (“Act 120”), P3 is the only
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government entity authorized to implement the Puerto Rico public policy for PREPA
November 10, 2021, as a domestic limited liability company under the laws of the
Commonwealth of Puerto Rico. Essentially, Genera is tasked with the operation and
of New Fortress Energy Inc. Under the OMA, Genera is the “Operator”.
8. This Court has subject matter jurisdiction pursuant to 48 U.S.C. § 2166(a)(2) and 28 U.S.C. §
1331 because this action is a civil proceeding arising in or related to cases under PROMESA.
proceeding pursuant to Rule 7001 of the Federal Rules of Bankruptcy Procedure, made
FACTS
9. For decades, PREPA was the public monopoly of energy provision in Puerto Rico. See
Statement of Motives, Act No. 120-2018; Statement of Motives, Act No. 17-2019. As a public
utility, PREPA managed the generation, procurement, and distribution of energy almost
exclusively in Puerto Rico. Its operations encompassed every aspect of the electric industry in
Puerto Rico.
10. In 2018, the Puerto Rico Legislature passed the Puerto Rico Electric Power System
Transformation Act, Act No. 120-2018, P.R. Laws ann. tit. 22 §§ 1111 et seq (“Act 120”). The
2
“PREPA Transactions” refers to any transaction that PREPA makes pursuant to Act 120-2018.
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purpose of this law was to create the framework for selling or transferring PREPA’s assets and
Private Partnership Act, Act No 29-2009, P.R. Laws ann. tit. 27 §§ 2601 et seq (“Act 29”).
11. The basis of Act 120 is the creation of public-private partnership contracts that relate
Any and all transactions carried out in accordance with the provisions of [Act
29] and this Act, whereby PREPA or the Government of Puerto Rico
establishes one or more Partnerships in connection with any of PREPA’s
functions, services, or facilities, or executes a Sales Contract for PREPA
Assets related to electric power generation. P.R. Laws ann. tit. 22 § 1113(m).
12. Before it passed, on March 6, 2018, Act 120 was presented as House Bill 1481 (“H.B. 1481”).
After its introduction, it was the object of legislative discussion, public hearings, and
and the Committee on Government of the House of Representatives issued a Positive Report
on May 9, 2018, which included amendments and the commentary of the public hearings.
Exhibit 3: Legislative History of Act 120 (Excerpts) at 1. For instance, the State Office
of Energy Public Policy (“SOEPP” or “OEPPE” for its Spanish acronym) testified:
This bill addresses what can be considered the beginning of the opening of
our electrical system’s market. We must consider that as part of the public
policy, efforts have been made to democratize energy—a concept which
includes putting an end to the energy monopoly, opening the process to public
participation, decentralizing our energy system and customer’s choice, which is
the consumers’ right to have access to and to choose other energy options. This
being the case, we must also consider and work to prevent any monopoly from
being constituted by the private entity or entities who buy(s) PREPA’s assets.
Id. at 2 (emphasis added).
13. The corresponding text approved after these hearings for H.B. 1481 included the following
language:
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Any PREPA assets used to generate energy shall not be sold, or otherwise
disposed of, or assigned, to one single Contractor under a Partnership
Agreement, or otherwise, as part of a PREPA Transaction. It is hereby further
provided that no Contractor shall sell to another Contractor any asset acquired from
PREPA that is used for energy generation. Under no circumstance shall this Act
be construed to authorize a monopoly in energy generation. Id. at 4 (emphasis
added).
14. After the Special Committee on Energy Affairs considered the bill and rendered its own
Positive Report on May 21, 2018, Id. at 5, the text of H.B. 1481 was altered to include:
Any All PREPA assets used to generate energy shall not be sold, or otherwise
disposed of, or assigned, to one single Contractor under a Partnership
Agreement or a Sale Agreement, or otherwise, as part of a PREPA Transaction.
It is hereby further provided that no Contractor shall sell to another Contractor any
asset acquired from PREPA that is used for energy generation, without the consent
of the Legislative Assembly. Under no circumstance shall transactions under this
Act be used to constitute and authorize be construed to authorize a monopoly in
energy generation. Id. at 9 (emphasis added)(strikethrough, italics and underline
in the original).
16. The evolution of this language shows the clear legislative intent to prevent any form of
monopoly over the Legacy Generation Assets, as the rigor of the language increases as the bill
progresses.
17. This language made its way into the final bill which became law:
All of the PREPA Assets devoted to electric power generation may not be
sold, or otherwise disposed of or assigned to a single Contractor under a
Partnership or Sales Contract, or otherwise, as part of a PREPA
Transaction. It is further provided that no Contractor shall sell to another
Contractor any asset acquired from PREPA that is devoted to electric power
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18. After Act 120 became law, the Puerto Rico Legislature also passed the Puerto Rico Energy
Public Policy Act, Act No. 17-2019. P.R. Laws ann. tit. 22 §§ 1141 et seq. ("Act 17"). This
law also incorporates the definition of PREPA Transactions. Id. § 1141a(t). Act 17 includes a
19. This language was ultimately the result of the legislative process and public participation in
Senate hearings. Act 17 was initially introduced as Senate Bill 1121 (“S.B. 1121”) on October
History of Act 17 (Excerpts). Upon consideration of the bill and the public hearings, the
Special Committee on Energy Affairs rendered a Positive Report on November 16, 2018. Id.
at 1. Among the comments they considered was the testimony of PREPA, where its
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Moreover, with regard to the limits established for the control of the capacity of
generation assets, they suggest that it be clarified that no electric utility company,
its subsidiary or affiliate, may control fifty percent or more of the capacity of
generation assets, so that we ensure that no company will obtain more than
50% and in turn become a monopoly. Id. at 3 (emphasis added).
20. On the same date, the bill was discussed in session by its proponents. Specifically, among
This puts an end to the monopoly and opens the path for competition in energy
generation and fuel diversity. There will no longer be one single producer of
generation or one single type of fuel. There cannot be a monopoly on the part of
one provider or a monopoly involving one fuel source. In fact, each and every
request for proposal under Act 29 for energy generation is individualized. It is
independent from the rest. This is not a package that a single provider can
obtain. Palo Seco will go through the entire process, likewise, Aguirre, Costa
Sur, San Juan. Id. at 10 (emphasis added).
22. After this date, the language of the bill was further amended to clarify and reiterate the
monopoly as the control of generation asset capacity in 50% or more. Id. at 13.
23. Pursuant to Act 120, on August 10, 2020, P3 launched the procurement process and issued the
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generation plants and gas turbine peaking plants[,]” which is referred to as the LGA Project.
are known as the Legacy Generation Assets combined. Id. at 3. The corresponding Request
for Proposals (“RFP”) was issued on November 10, 2020. Id. at 5. On August 25, 2022, the
awarded to Genera. Id. at 3. On November 9, 2022, the Partnership Committee approved the
24. The purpose of the OMA was defined for Genera to “stabilize and optimize the operations of
Puerto Rico's Legacy Generation Assets until replacement renewable and distributed energy
generation is installed and the Legacy Generation Assets are decommissioned[.]” Id. at 3.
25. The subsequent approval process was kept hidden from the public until the execution was final.
Thus, Plaintiff cannot provide details on this process. However, on January 24, 2023, P3,
PREPA and Genera signed the OMA, under which P3 is the Administrator; PREPA is the
Owner; and Genera is the Operator. This is the effective date of the OMA from which the terms
of the contract begin to accrue. Exhibit 1: OMA. Genera is scheduled to take over PREPA’s
26. The OMA is, by definition, an Operation and Maintenance Agreement. As such, this
transaction allows PREPA to keep its property rights over the Legacy Generation Assets.
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27. However, for the term of the OMA, Genera will assume the operation and management of
these assets and be responsible for decommissioning power plants. Pursuant to its terms,
Use of Legacy Generation Assets. From the Service Commencement Date and
for the remainder of the Term thereafter, Operator and Subcontractors shall
have the exclusive right (except as set forth in this Agreement), subject to
Section 3.5 (Right of Access), to enter upon, occupy and use the Legacy
Generation Assets and the Generation Sites for the sole purpose of performing
the O&M Services, Mobilization Services, Decommissioning Services, and
Demobilization Services, as applicable, in accordance with the terms hereof.
Exhibit 1: OMA, Section 3.3, at 46_ (emphasis added).
28. Additionally, PREPA, P3 and the Puerto Rico Energy Bureau (“PREB”) cannot enter the
29. Moreover, the OMA establishes Genera’s exclusive rights to operate the Legacy Generation
Assets:
Exclusivity. The Parties covenant and agree that Operator, acting directly
or through Subcontractors, together with their respective Representatives,
shall be the sole and exclusive providers of O&M Services with respect to
the Legacy Generation Assets and that Operator shall not (i) generate Power
and Electricity using the Legacy Generation Assets other than on behalf of
Owner, or with the approval of PREB (or Administrator, if applicable),
pursuant to the terms and conditions of this Agreement and in accordance with
Applicable Law or (ii) use the Legacy Generation Assets (A) for any purpose
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other than the purposes contemplated hereby or (B) to serve or benefit any
person other than Owner. 4.1
Exhibit 1: OMA, Section 3.6, at 47 (emphasis added).
30. Furthermore, the OMA establishes that “[t]he Mobilization Services are intended to ensure an
orderly transfer of the care, custody and control of the Legacy Generation Assets to
31. As such, Genera will have total and exclusive control over all the Legacy Generation Assets,
which include the following power plants: (1) Aguirre; (2) Cambalache; (3) Costa Sur; (4)
Culebra; (5) Mayagüez; (6) Palo Seco; (7) San Juan; (8) Daguao; (9) Yabucoa; (10) Jobos;
(11) Vega Baja; and (12) Vieques. Exhibit 1: OMA, Annex I – Legacy Generation
Assets. See, also, Exhibit 5: Fourth Partial Report for H.R. 243 at 2. (“Gil Enseñat
added that the ownership of the assets is retained by PREPA, but that the physical control of
power generation plants and the manner in which these are managed was delegated to Genera
. . . .”).3
32. This constitutes the totality of public thermal and gas power plants, which means that all of
PREPA’s generation will pass to Genera. According to the President of PREPA’s Governing
Board, the Legacy Generation Assets are attributed 69% of PREPA’s total capacity for
generation. Exhibit 5: Fourth Partial Report for H.R. 243 at 2 (“He clarified that the
original)).4
3
Public video footage of the hearing is available at: AHORA: Comisión de Desarrollo Económico, Planificación,
Telecomunicaciones, Alianzas Público Privada, YOUTUBE (February 8, 2023),
https://www.youtube.com/watch?v=oahPgCcHJ38 (at minute 1:01:37 the witness was sworn in before the House or
Representatives and this portion of his statement is found at minute ‘1:36:00).
4
Id. (at minute 1:01:37 the witness was sworn in before the House or Representatives and this portion of his statement
is found at minute 1:38:00).
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33. Under OMA, Genera receives compensation for its services and is also subsidized by PREPA’s
Operator shall perform the O&M Services as an independent contractor and shall
not have any legal, equitable, tax, beneficial or other ownership or leasehold interest
in the Legacy Generation Assets. Without limiting Operator’s right to be
reimbursed for all Pass-Through Expenditures, the only compensation
payable by Owner to Operator for providing the O&M Services and the
Decommissioning Services for the Legacy Generation Assets shall be the O&M
Service Fee. The Service Accounts shall be funded in the manner contemplated
hereunder for Operator’s payment of Pass-Through Expenditures (without limiting
Owner’s indemnity or other obligations hereunder). Exhibit 1: OMA, Section 3.2,
at 46 (emphasis added).
34. Even before the OMA services begin, the Mobilization Period Compensation is in effect.
Exhibit 1: OMA, Section 4.6, at 63-64. This compensation is not fixed, but is initially
capped at $15 million, unless otherwise necessary. Exhibit 1: OMA, Section 4.6(b), at 64.
35. Additionally, within the Title III case, Genera was granted administrative expense priority “for
any accrued and unpaid amounts required to be paid by Owner under this Agreement during
the Mobilization Period, including the Mobilization Service Fee.” Exhibit 1: OMA, Section
4.1(c)(i), at 49.
36. Once services commence, the Service Fee is due in addition to the passthrough expenditures:
37. The Fixed Fee portion of Genera’s compensation is for $22.5 million a year, adjusted for the
CPI Factor and decommissioning after year six (6). Exhibit 1: OMA, Annex II, at 158. On
In addition to the fees described in the foregoing paragraph, with respect to each
Contract Year from and after the Service Commencement Date and as described in
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38. These incentives are for six (6) categories of service, only three (3) of which are the object of
39. These incentives can be paid through percentages of savings or fixed dollar quantities,
depending on the category and level of performance. Exhibit 1: OMA, Annex II, at 161-
168.
40. On the other hand, Pass-Through Expenditures are defined as “any reasonable and documented
costs and expenses incurred by Operator in connection with the performance of its obligations
. . . .” Exhibit 1: OMA, Section 7.2, at 92-93. These monies are deposited by PREPA in
the Service Accounts described in the OMA. Exhibit 1: OMA, Section 7.6, at 96. These
accounts are only for Genera’s use and, as such, Genera “shall under no circumstances be
required to pay for or incur in any Pass-Through Expenditure, liabilities under Facility
Contracts, or Fuel Costs on its own account . . . .” Exhibit 1: OMA, Section 7.6(g), at 100.
In fact, if the Service Accounts are unfunded, Genera has a free pass:
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41. These expenditures include any subcontracting Genera does. Exhibit 1: OMA, Section 11.1,
at 107. Only disallowed costs are attributable to Genera. Exhibit 1: OMA, Section 7.7, at
101.
42. Meanwhile, PREPA is also responsible for paying P3’s costs as Administrator of the OMA:
Owner shall be solely responsible for all costs and expenses of Administrator in
connection with the performance of Administrator’s obligations under this
Agreement, and shall pay or reimburse Administrator promptly for any out-of-
pocket or third-party costs and expenses. Exhibit 1: OMA, Section 7.8, at 102
(emphasis added).
43. In summary, under the OMA, PREPA is saddled with the payment of Genera’s operating fee,
incentive fees and operating costs, including subcontractor fees, in addition to P3’s costs.
Moreover, PREPA will continue paying any taxes related to the Legacy Generation Assets as
property, given that it retains ownership. Exhibit 1: OMA, Section 12.2(b), at 109.
44. Genera does not need to fulfil its obligations and provide services to the people of Puerto Rico
if PREPA for any reason fails to replenish the Service Accounts. Genera will have no monetary
or capital obligations. Genera will have the right to fixed fees and incentives for its services,
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while PREPA pays for all its operational expenses. Yet, PREPA does not receive any benefit
45. Genera does not invest in capital improvements; it does not provide services that are new or
innovative; it does not share the risks of failure because its fixed fee is more or less guaranteed;
etc.
46. Pursuant to the OMA, there are ten (10) events of default attributable to Genera. Exhibit 1:
OMA, Section 14.1, at 115. Of those, only two can be related to the provision of services.
performance standards is an event of default so long as the failure applies one of the four
metrics described for two consecutive years, so long as there is no force majeure,5 or forced
47. On the other hand, there are seven (7) events of default attributable to PREPA. Exhibit 1:
OMA, Section 14.3, at 118. This includes the failure to fund Service Accounts. Exhibit 1:
OMA, Section 14.3(f), at 119. This means that if PREPA is unable to fund the Service
5
The OMA defines a “Force Majeure Event” as:
[A]ny act, event, circumstance or condition (other than lack of finances) whether affecting the
Legacy Generation Assets, Owner, Operator or any of Owner’s contractors or Operator’s
Subcontractors that (i) is beyond the reasonable control of and unforeseeable by, or which, if
foreseeable, could not be avoided in whole or in part by the exercise of due diligence by, the Party
relying on such act, event or condition as justification for not performing an obligation or complying
with any condition required of such Party under this Agreement, and (ii) materially interferes with
or materially increases the cost of performing, such Party’s obligations hereunder, to the extent that
such act, event, circumstance or condition is not the result of the willful or negligent act, error or
omission or breach of this Agreement by such Party; provided, however, that the contesting in good
faith or the failure in good faith to contest such action or inaction shall not be construed as a willful
or negligent act, error or omission or breach of this Agreement by such Party. Exhibit 1: OMA,
Section 1.1 at 21.
6
The OMA defines a “Forced Outage” as “an unplanned disconnection or stoppage of a Legacy Generation Asset due
to failure or defect of the unit or its equipment, or another such event, including due to the operational or unplanned
malfunctioning of equipment on the transmission grid or human error that impacts the operation of the Legacy
Generation Asset.” Exhibit 1: OMA, Section 1.1 at 21.
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Accounts, not only is Genera under no obligation to provide services as previously mentioned,
48. Genera also has the right to terminate the OMA if there is an extended force majeure event that
interferes with its services,7 or a change in law.8 Exhibit 1: OMA, Section 14.5(b),(c), at
120.
49. Additionally, Genera will be exempt from the Title III automatic stay to exercise its termination
rights and remedies. Exhibit 1: OMA, Section 14.4, at 119. Regardless of the event of
default, these remedies include any accrued and unpaid amounts and the pass-through
expenditures for Genera’s exit and the service fee for that exit. Exhibit 1: OMA, Section
14.6(a)-(b), at 120-121; Section 17.3(b)-(c), at 132. There is also a termination fee, which
depends on the event of default, of $45 million. Exhibit 1: OMA, Section 14.6(c), at 121;
Annex XIV, at 279. If the OMA is terminated by law or by Genera because of a Change of
Law, a circumstance beyond PREPA’s control, PREPA will pay the Termination Fee. Exhibit
1: OMA, Section 14.6(c)(i), at 121. However, if P3 terminates the contract because Genera
fails to pay penalties or is in default of minimum performance thresholds, then and only then
does Genera pay the termination fee. Exhibit 1: OMA, Section 14.6(c)(ii), at 121.
50. Moreover, Genera’s liability is limited to $5 million for a given contract year and $20 million
for the term of the contract. Exhibit 1: OMA, Section 19.3(a), at 138. Even if Genera
7
It should be noted that this expressly includes, but is not limited to, earthquakes, landslides, floods, or similar
occurrences; pandemics (including COVID-19); any event that results in a state of emergency; a Change in Law;
labor disputes occurring within twelve (12) months of the commencement date; any failure, malfunction, or
unavailability of the transmission grid; among countless others. Exhibit 1: OMA, Section 1.1 at 21.
8
Here, “Change in Law” for purposes of termination is one that “ has had, or is reasonably expected to have, a material
adverse effect on the performance or the cost of performance by the Parties of their respective obligations under [the
OMA] or on the operation or maintenance of the Legacy Generation Assets . . . .” Exhibit 1: OMA, Section 1.1 at
10. It includes changes to the scope of PREB’s oversight or the regulation it applies to Genera. Id. at 11.
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incurs in gross negligence or willful misconduct, the indemnity is limited to certain caps.
51. UTIER is an interested person for the purposes of this action. The OMA displaces PREPA’s
workforce, which translates into a substantial loss of members, and affects the pension system,
of which UTIER’s membership partakes. From around 800 remaining members, UTIER
52. Under the OMA, most of the remaining positions in PREPA pass to Genera. Meanwhile,
Genera does not assume any of PREPA’s obligations with UTIER’s members nor its other
employees. This forces UTIER’s members to give up their union representation, their
collectively obtained rights,9 and their pensions; retire early; or transfer to other governmental
agencies where their special skill sets will not be set to good use—as we have seen with the
53. All of these options weaken UTIER’s ability to exist and fulfill its purpose. They also increase
the burden on SREAEE, by adding retiree pension liabilities, dispersing the source of employer
54. Any action that harms or further impairs SREAEE financially will further its current
insolvency and as a result, UTIER members, as active participants of the SREAEE, and as
retirees, will be injured. This will further injure UTIER’s retirees’ chapter and employees since
9
Based on the terms of the OMA, they would also lose many of the basic individual workers’ rights that private sector
employees have in Puerto Rico. Specifically, those workers that move to Genera will be deprived on their rights under
Act No. 80 May 30, 1976. Exhibit I: OMA, Annex X, at 268.
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ARGUMENT
55. Puerto Rico law recognizes that parties have freedom to contract as they wish. P.R. Laws ann.
tit. 31 § 9753. However, this freedom cannot be exercised in abusive ways, nor can it violate
the law. Id. As such, Puerto Rico’s civil law expressly states that parties are free to agree on
any clause so long as it is not contrary to the law, moral or public order. Id. If a contract violates
56. Pursuant to the Civil Code, “any interested person that has not acted in bad faith to accrue a
benefit, may request that a null legal transaction be declared invalid.” Id. § 6313 (our
translation). Such a declaration makes the transaction invalid or inexistent from its origins or
from the moment it became null. Id. § 6315(a). As a result, the parties to the transaction would
need to return the benefits received, according to the norms of good faith. Id. § 6316. In view
of the foregoing, a contract that violates a law in Puerto Rico is null and, therefore, invalid
from the moment that it was originated, or it violated the law. See Municipality of Ponce v.
Vikaret, 65 P.R. Dec. 370, 381 (1945) (“Nullity is a declaration that the
contract never existed because in the execution thereof one of the essential requisites was
lacking. Both rescission and nullity set aside a contract; but rescission does so for equitable
reasons which do not really affect its validity. Nullity does so for reasons which affect its
I. THE OMA IS NULL AND VOID FOR VIOLATING PUERTO RICO LAW.
57. As previously mentioned, Puerto Rico law has specific legal provisions regarding PREPA
Transactions. Among those, Act 120 and Act 17 expressly forbid the constitution of a
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See P.R. Laws ann. tit. 22 § 1118(h); Id. § 1141g(a). See, also, Id. § 1054ii(a).10
58. This monopoly is defined in Act 17 as any PREPA Transaction wherein 50% or more of
PREPA’s generation asset capacity is controlled by a single private entity, including by and
through its subsidiaries. Id. § 1141g(a); Id. § 1054ii(a). These definitions are supported by the
legislative history behind both Act 120 and Act 17, where the focus on preventing a private
monopoly is clear and the designation of the threshold for a private monopoly was the object
59. Under these laws, the threshold for a monopoly in generation is clearly defined as “[an] electric
power service company, by itself, through or jointly with any subsidiary or affiliate thereof,
[in] control [of] fifty percent (50%) or more of the power generation assets’ capacity . . .
.” Id. § 1141g(a)(emphasis added). In this context, according to the U.S. Energy Information
commonly expressed in megawatts (MW), that generating equipment can supply to system
60. Moreover, while “control” is not defined in the laws, it is clearly distinguished from ownership,
which precludes any requirement for the PREPA Transaction to be a sale. In fact, under oath,
10
Act No. 57-2014, which establishes PREB’s functions, also includes this language:
No electric power service company or the subsidiary or affiliate thereof may control fifty
percent (50%) or more of the power generation assets’ capacity, except for the Electric Power
Authority in the case of legacy power generation assets. The maximum percentage of the power
generation assets’ capacity that an electric power Service Company, or the subsidiary or affiliate
thereof may control may be revised by the Bureau to prevent the establishment of a monopoly
in generation, but in no event it may reach (50%) or more of the power generation assets’
capacity. (emphasis added).
11
Generator capacity, EIA, https://www.eia.gov/tools/glossary/ (Last visit May 31, 2023).
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the President of PREPA’s Governing Board admitted that while “the ownership of the assets
is retained by PREPA, . . . the physical control of power generation plants and the manner in
which these are managed was delegated to Genera . . . .” Exhibit 5: Fourth Partial Report
61. Therefore, because the OMA transfers control of 69% of PREPA’s generation asset capacity,
the OMA violates Act 120 and Act 17 by creating a monopoly in generation. As such, the
OMA violates Puerto Rico law. Consequently, pursuant to civil law, the OMA is null and void.
II. THE OMA IS NULL AND VOID FOR VIOLATING PUBLIC ORDER.
62. While the foregoing is sufficient for the OMA to be declared null and void, in addition to
violating Puerto Rico law, the OMA is also contrary to the public order. While Puerto Rico
law recognizes the principle of contractual autonomy and freedom, public order is a limit on
that freedom. See Demeter Int'l, Inc. v. Secretario de Hacienda, 199 P.R. Dec. 706, 727 (2018).
63. The concept of public order persists in Puerto Rico’s civil law. This concept is defined as a set
of values for the general welfare of a society, the moral and ethical norms that permeate the
legal order whether or not they are expressed in any law. See Id. at 727-29; Hernández v.
Méndez & Assocs. Dev. Corp., 105 P.R. Dec. 149, 153 (1976). It is conceived as a limit against
the abusive exercise of contractual freedom. See Demeter Int’l, 199 P.R. Dec. at 727-29; De
Jesús González v. Autoridad de Carreteras, 148 P.R. Dec. 255, 266 (1999). Its purpose is to
create a balance between public welfare and individual liberty to enter into contracts. De Jesús
González, 148 P.R. Dec. at 266. One instance of contracts and clauses that are contrary to the
12
It should be noted, however, that the U.S. Energy Information Administration defines control as “the possession,
direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether
through the ownership of voting shares, by contract, or otherwise.” Control, EIA https://www.eia.gov/tools/glossary/
(Last visit May 31, 2023). The same definition is found in the OMA. Exhibit 1: OMA, Section 1.1, at 14. This is
consistent with the view that control is not limited to sale or ownership.
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public order is the leonine or abusive contract. Id. at 267. These are contracts where one party
has an unjustified advantage over the other, which is contrary to the reciprocity that is
necessary for valid contractual obligations. See Demeter Int’l, 199 P.R. Dec. at 728. As such,
leonine contracts are inherently unfair and do not distribute the risks between parties. This
concept is also contained in Act 29 which requires that contracts for public-private partnership
provide for “[t]he distribution of expenses between the selected Proponent and the
Partnering Government entity.” P.R. Laws ann. tit. 27 § 2609(b)(emphasis added). The
public policy of Puerto Rico in these transactions is precisely “to apportion between the
Commonwealth and the Contractor the risk entailed by the development, operation, or
64. When the contract is public in nature, the involvement of public funds and goods vests the
transaction with the highest public interest. As such, norms such as the public order
requirement are more rigorous, to protect the public. See Demeter Int’l, 199 P.R. Dec. at 729.
See, also, De Jesús González, 148 P.R. Dec. at 267-68. This is further supplemented by
constitutional considerations regarding the legitimate and prudent use of public funds. De Jesús
65. While PREPA is footing the bill for Genera’s operations and P3’s oversight functions, under
the OMA, Genera will be receiving substantial fees for the stabilization of the Legacy
Generation Assets, using federal funding for any necessary repairs. Genera does not invest
anything in PREPA’s assets or operations, it incurs absolutely no costs. Meanwhile, the OMA
has already created such costs that the Commonwealth needed to identify funding to lend
PREPA for the execution of the OMA. Exhibit 6: FOMB Letter, at 5. Just by setting up shop
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in Puerto Rico, Genera is entitled to public funds, without even having commenced to provide
services.
66. Moreover, Genera has many options to terminate the contract if the political landscape attempts
to protect Puerto Rico’s consumers, environment or other aspects that may “adversely affect”
its operations under the OMA. Additionally, force majeure and forced outage events, which
are quite commonplace in Puerto Rico, excuse Genera from performing obligations and may
67. PREPA does not derive any benefits from the OMA. On the contrary, the OMA increases
PREPA’s operational costs without any guarantee of improvement and while PREPA is in a
grave financial crisis that is currently being addressed in this Court under the Confirmation
Process. 13
68. There is an illegal disparity between the obligations, responsibilities, and benefits of the parties
in the OMA. This imbalance results in a leonine contract. Therefore, the O&M Agreement is
Declaratory Judgment that the OMA is null and void for violating Puerto Rico Law.
70. Under Puerto Rico law, contracts are null and void if they violate the law.
71. That said, the OMA violates Puerto Rico law, specifically Act 120 and Act 17.
13
It should be noted that none of the parties to the Confirmation Process have been able to identify the effect of the
OMA on PREPA’s restructuring. However, experience with Luma Energy LLC should serve as a cautionary tale of
the budgetary and operational deficits we can expect, in addition to the dangerous learning curve for a private utility
in such a peculiar infrastructure, without the benefit of the collective experience of PREPA’s workforce.
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72. Consequently, this Court should issue a declaratory judgment decreeing that the OMA is null
and void.
Declaratory Judgment that the OMA is null and void for violating public order.
74. Leonine or abusive contracts are contrary to public order and, therefore, null and void.
75. Moreover, the OMA is a leonine and abusive contract where Genera is the only beneficiary
77. Consequently, this Court should issue a declaratory judgment decreeing that the OMA is null
and void.
Preliminary and Permanent Injunction enjoining the enforcement of the OMA for
being null and void.
79. Upon a declaration that the OMA is null and void, it would cease to exist retroactively and the
parties to it would be forced to return their concessions, leaving them in the same conditions
as they began.
80. Consequently, this Court should issue injunctive relief enjoining the enforcement of the OMA.
81. Meanwhile, the OMA will cause imminent irreparable harm to UTIER as it continues
displacing UTIER’s membership from PREPA and impairing the SREAEE, of which UTIER’s
82. Genera is scheduled to take over PREPA’s Legacy Generation Asset operations on July 1,
2021.
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83. Therefore, pursuant to Bankruptcy Rule 7065 and Fed. R. Civ. Proc. 65, it is urgent that this
Court issue a preliminary injunction enjoining PREPA, P3, and Genera from enforcing the
OMA.
a. The OMA is null and void for violating Puerto Rico law.
b. The OMA is null and void for violating public order, and Federal Law.
c. Enjoining the Defendants from executing the OMA and return their concessions,
WE HEREBY CERTIFY that on this same date we electronically filed the foregoing
with the Clerk of the Court using the CM/ECF system, which will send notification of such filing
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