Aqueduct & Sewer Authority Management: The 1980s and 1990s represented a serious challenge for the Puerto Rico Aqueduct and Sewer Authority (PRASA) inasmuch as it had to comply with strict Federal water standards and requirements that required a $1 billion capital expenditure, but perhaps even more critical, such major overhaul also demanded a complete revamping of the existing management personnel. The Government Development Bank for Puerto Rico was entrusted to guide PRASA’s Board of Directors in finding and negotiating a private management agreement which would guarantee effective leadership and compliance with the Federal requirements. A five-year agreement was ultimately negotiated and reached with the French Compagnie Generale des Eaux (later Vivendi).
Electric Power Generation Privatization: Puerto Rico’s economic growth in the 1980s and 1990s required additional electric power generation capacity from that produced by the state-owned Puerto Rico Electric Power Authority (PREPA). During the 1990s, Governor Rossello instructed PREPA and the Government Development Bank for Puerto Rico to execute his vision and public policy, which favored the inclusion of the private sector in privatization efforts and in private-public partnerships to alleviate the government’s economic burden for major infrastructure projects. Thus, PREPA initiated an aggressive expansion, through the private sector, of constructing two new privately-owned plants with a clear mandate that they would also incorporate technologies other that petroleum. Puerto Rico at that point operated 96% of its electric system using oil. A total of 900 MW were added to the PREPA grid between 1994 and 2000 through a clean coal 450 MW plant, and another similarly sized facility running on Liquefied Natural Gas.
Government-Owned Hotel Privatization: During the 1990s the government still owned several major hotels throughout Puerto Rico, and their employees were hired by another government-controlled corporation. Hence, bureaucracy, high costs and inherent inefficiencies led the government of Puerto Rico, through its Privatization Committee headed by the Government Development Bank for Puerto Rico and in partnership with the P.R. Tourism Company, to begin selling the hotels to the private sector. The privatization strategy was successful and major hotels were sold to international franchises interested in expanding operations in Puerto Rico. At the same time, the government was able to get rid of wasteful and mismanaged assets. Private sector brought the necessary capital, management and expertise to make the operations successful. Most employees were transferred to the private sector with the new owners.
21st Century Schools Design-Build-Manage: Puerto Rico’s school modernization program started in 2010 and contemplated the renovation of schools distributed among all municipalities of Puerto Rico. The program was known as “Schools for the 21st Century” and involved construction work in 81 public schools: 71 entailed the modeling/reconstruction of existing schools, while the remaining 6 involved the construction of new school buildings. Financing of the program was provided with funds that predominately came from Qualified School Construction Bonds (QSCB), authorized by the American Recovery and Reinvestment Act (ARRA) of 2009. In 2011, the government of Puerto Rico sought private partners to deliver about a dozen new K-12 schools. The Administration contracted with private operators to design, build and maintain schools across the island, thus replacing many decades-old, crumbling schools -- notable for a jurisdiction that has suffered from poor credit and limited access to infrastructure capital. A second phase of the School Modernization Program has started with the remaining funds available under the program.
Government Hospital Privatizations: A focal theme of that the government of Puerto Rico operated on and spearheaded from 1993-2000, was a complete overhaul and reform of the chronically bureaucratic and inefficient state-owned and managed health care system. The government engineered the privatization and sale of all government owned facilities, the transfer of the employees to the private sector and the purchase of private sector insurance with state and Federal funds previously allocated to run the government system. The Privatization Committee hosted by the Government Development Bank for Puerto Rico was entrusted to carry out the massive task of dismantling, through targeted sales to the private sector, the vast portfolio of government owned regional hospitals and multiple Centers for Diagnostic and Treatment. To this day, the Health Reform still operates as envisioned 20 years ago.
PR Telephone Company Privatization: The Telecommunications Act of 1996 was the first major overhaul in the telecommunications industry in the United States in 60 years. In essence, it opened up the market to competition. As a result of this groundbreaking Federal legislation, the government of Puerto Rico reevaluated its position vis a vis the state-owned P.R. Telephone Company (PRTC). Arguably the crown jewel of state-owned enterprises in Puerto Rico, the PRTC was a profitable company. However, it was also a monopoly that would now have to open up all of its lines of business for competition as a result of the new Act. The Government Development Bank for Puerto Rico was given a mandate to carry out the very complex and polemical privatization of PRTC. Unlike other privatizations that generated little opposition, the privatization of PRTC became a controversial hot button issue. Notwithstanding, the entire process took less than 2 years, including legislative approval. The transactional value of the deal amounted to over $2 billion, making it the largest transaction ever done in Puerto Rico.
PR Maritime Shipping Authority Privatization: Navieras, the state-owned shipping company, was the result of a 1970s acquisition by the state of several ill-operated shipping companies serving the island of Puerto Rico. Since its inception, the state-owned shipping company, which was meant to be run like a private company, was plagued with bureaucratic traps, lack of adequate funding, decayed infrastructure and rampant political activism. All of these elements led to perennial losses for the company and compromised its efficiency and operation. Thus, the government of Puerto Rico sought to privatize the poorly managed state-owned behemoth. In what was the first successful privatization in Puerto Rico, the Government Development Bank for Puerto Rico organized, structured and led the way in 1995 to a sale, with approval from the Legislature, of all the assets of Navieras to a private bank-led capital fund associated with stateside shipping professionals. As a result, effective competition in the Puerto Rico shipping market was once again a reality.
PR-22 & PR-5 Highway Concession: The Puerto Rico Public-Private Partnerships Authority along with the Puerto Rico Highways and Transportation Authority (PRHTA) completed the administrative concession of PR-22 & PR-5. This is the first concession of its type to be successfully achieved in Puerto Rico. On June 20, 2011, Autopistas Metropolitanas de Puerto Rico, LLC (Metropistas), a consortium composed by Goldman Sachs Infrastructure Partners and Abertis Infraestructuras, was selected by the government of Puerto Rico to bring these highways to world-class standards. The proposal represented the largest private investment in infrastructure in the United States at that time. As part of the total investment of $1.436 billion, over $350 million was set to be invested in improvements and maintenance of the PR-22 and PR-5. $56 million was set for immediate investment for rehabilitating and improving the safety of these two highways. The PR-22 has seven toll stations, generating $85.1 million in 2011.
LMM International Airport Concession: The Luis Muñoz Marín International Airport is owned by the Puerto Rico Ports Authority and managed by Aerostar Airport Holdings, a public-private partnership that was awarded a lease by the government of Puerto Rico to operate and manage the airport for 40 years beginning in 2013. It is the second international airport to be privatized in the U.S. and its territories, and, as of 2013, is the only currently privatized airport in the nation. The transaction included a $615 million upfront payment to the Puerto Rico Ports Authority, as well as annual payments to the public corporation over the life of the contract that add up to $550 million. The balance of the deal included components to help boost local tourism, and also involved investments for modernizing and improving the airport and an incentives fund to attract new routes and new passengers. Aerostar Airport Holdings rose from an original field of 12 bidders, and its final offer edged out the bid from co-finalist Grupo Aeropuertos Avance, comprised of Ferrovial Aeropuertos and Macquarie Infrastructure & Real Assets, the world's biggest infrastructure investment fund.
Predco’s professionals were also among the main persons involved in the conceptualization and implementation of Puerto Rico’s most recent public-private partnership program, widely hailed as a model for public-private partnerships. Puerto Rico has become a recognized leader in the public-private partnership arena with the Public-Private Partnership Reform, which has been hailed as one of the most novel, ambitious and well-thought out pieces of legislation that has ever been generated in this field. The administrative concession of PR-22 & PR-5 (two of Puerto Rico’s main highways), the construction and renovation throughout the island of more than 100 state-of-the-art Schools for the 21st Century and the concession of LMM International Airport have made possible the current and future investment of $4.7 billion through public-private partnerships. This has resulted in several awards from industry experts for the execution of the transactions that took place in Puerto Rico.
Modern management of local and state governments dictates that, when applicable, governments can now resort through a variety of mechanisms, to the private sector in order to assist them in effectively managing, modernizing or administering public services and assets. Puerto Rico has been no exception to this trend. Since the 1990s, under the auspices of the Government Development Bank for Puerto Rico and the Privatization Committee, both then headed by one of Predco's professionals, the Island’s government embarked on an aggressive and coordinated inter-governmental effort to reduce and/or eliminate government bureaucracy by transferring to the private sector certain government services, assets and functions that could no longer be efficiently and effectively managed by a bloated and aging bureaucracy. Predco professionals supervised and presided over a government committee that analyzed opportunities for private sector involvement without dismissing public employees, wherein private sector parties were required to hire the workforce with certain guarantees of employment and retirement. These transactions were all extremely complicated and required the skillful organization and coordination of bankers, attorneys, actuaries, accountants and high level government officials determined to execute the deals. Among the salient transactions at that time were (a) the sale of the Puerto Rico Telephone Company to a GTE led consortium. The transaction was valued at over $2 billion making it the largest deal ever closed in Puerto Rico; (b) the sale to the private sector of the government owned shipping company, Navieras; (c) the sale of government-owned hotels to private investors; and (d) the sale of dozens of government-owned Centers for Diagnostic Treatment and Hospitals as part of the Puerto Rico's Health Reform, which guaranteed private insurance to over 1.6 million puertoricans.