On Good Authority

Puerto Rico P3 Authority director Omar Marrero speaks to Marina Formoso at P3 Hub LatAm about how the island is fighting hard to overcome adversity with an exciting new pipeline

Can you provide details of your ongoing P3 program, following the devastation caused by the recent hurricanes?

Before Irma and Maria we had an ambitious P3 program. As soon as we got into public office in January our main goal was to jump start the plans. Unfortunately for the last four years the program was not as optimistic as we think it should have been, so we took the law with the current framework and amended it to allow two new important mechanisms: the predevelopment agreements and also the unsolicited proposals.

And how did that affect your plans going forward?

Once we made these amendments, we identified the projects that we wanted to put forward which, at that time, was around 22 priority projects. Then we addressed several advisors to assess the ability of these projects.

In the third quarter of 2017, we were supposed to launch the first projects of those 22. This was due to happen by September 21, but then Maria hit and we had to reshuffle our priorities.

We now just need to see how to move these plans forward to make sure we implement the public policy, and at the same time we need to reconcile the policy with the needs of the moment.

But despite the recent events, our programme remains in place.

So, what are the current key opportunities for investors?

The governor recently announced the first P3s that will commence their procurement process. In addition to that, the three unsolicited proposals that we received after the amendment of the law have been accepted for further evaluation.

We also expect that before the year-end we will announce additional projects that we had already identified as priority schemes. Obviously there is a desire to move on with them as well.

So, in essence even though we had to reshuffle our priorities to suit our immediate needs, we are very committed to doing this through the use of P3s. Although we need to focus on rebuilding and recovering, we also need to think in the long term about how we are going to build a stronger and more resilient Puerto Rico.*

What will attract investors to your pipeline?

After Maria we want to reiterate that we see this as a unique opportunity for the private sector to come forward and be creative and help Puerto Rico to get back on its feet.

So even though we are still concentrating our efforts on the priority projects that we initially identify, we are also identifying some areas that the private sector could be looking at in order to come up with better solutions.

These are the same areas that suffered the most during the hurricane such as energy and water, and not only the water utility; also waste water and waste management These are the areas that were most affected by Irma and Maria, so we believe that it should be looked at as an area for the private sector to come on board.

In the energy sector, for example, we believe that Puerto Rico should be departing from this highly-centralized generation with the long distance of transmission and distribution lines and we should be looking at a more distributed generation, where you locate the generation closer to the point of consumption and the consumer.

Projects like this that include renewable energies, smart grids, and even energy storage and those types of elements will represent a perfect opportunity for the private sector in Puerto Rico.

We should be considering whether we should be embarking on an underground program for certain and critical lines, for example.

That is something that is very capital intensive so we believe that the private sector will be able to provide solutions. Also, smart city street lighting, which goes beyond replacing the bulbs for LED lighting.

What we are discussing is the interconnectivity of the city, which could help us to be more resilient and remain connected during or after a natural disaster. It would also help the recovery phase.

What about opportunities for emerging sectors, such as broadband?

Even though in Puerto Rico we have an underground ring of broadband, I think that we need to engage the private sector in order to go the last mile and be able to build a more resilient internet network. After Maria not only the energy and the water were knocked down, but also the telecommunications and the internet. So we see this as very important in order to make sure that we recover as quickly as possible.

What would you say is the key priority?

As previously mentioned, the water and waste water sectors. When you consider that the energy supplies were down, waste water facilities rely heavily on that, so we resulted in two problems instead of one – so the sector was hit very hard.

Now we would like to see our water utility considering increasing its share of energy generation through hydroelectrics, for example.

These are just some ideas that we have had in the aftermath of Maria. But I think that instead of us telling the private sector what they should be thinking or what their proposal should be about, I believe this is the perfect moment for the private sector to take the leading role and be more proactive because they have experience from working in other parts of the world.

What kind of investors are you seeking to work with and what type of firm will make a good partner for you on these plans?

From our partners we are looking for experience and partners that have a proven track record. We want partners that are aware that this is going to be a long-term partnership and in an agreement where we both need to feel comfortable.

This cannot be a situation where the private sector will gain and the public sector will lose or vice-versa. In the end, what we are looking for is for the right partner that will support Puerto Rico in the long term.

We are certain that we will surpass the challenges that we are facing right now, not only on the fiscal and the economy fronts but also in the aftermath of Maria. We are looking for the right partners that are going to bet on the people of Puerto Rico.

* Since this interview, the authority has received two more unsolicited proposals for energy and port deals, with tenders mooted for the first quarter of next year