latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/joint-venture-wins-15-year-contract-to-run-puerto-rico-electric-grid-59143354 content esgSubNav
In This List

Joint venture wins 15-year contract to run Puerto Rico electric grid


The Big Picture: 2024 Energy Transition Industry Outlook

Case Study

An Oil and Gas Company's Roadmap for Strategic Insights in a Quickly Evolving Regulatory Landscape


Essential IR Insights Newsletter Fall - 2023


Cleantech Edge: Private energy transition capital stages subdued summer rebound

Joint venture wins 15-year contract to run Puerto Rico electric grid

A newly formed joint venture has won a 15-year contract to revamp Puerto Rico's transmission and distribution system, which was devastated by two hurricanes in September 2017.

LUMA Energy LLC, owned 50% by ATCO Ltd. company Canadian Utilities Ltd. and 50% by Quanta Services Inc., was selected to "modernize and operate" the island's electric grid following an 18-month competitive bidding process held by the Puerto Rico Public-Private Partnerships Authority, or P3 Authority, the companies behind the venture announced June 22.

LUMA Energy will operate and modernize the 18,000-mile electric system under a 15-year operations and management agreement with the existing utility, the Puerto Rico Electric Power Authority.

LUMA Energy, which will be headquartered in San Juan, Puerto Rico, is developing a team to take over operation of the grid following a transition period expected to take 10 to 12 months.

The venture also has engaged the services of Innovative Emergency Management Inc., a global emergency management consulting firm with experience in the administration of Federal Emergency Management Agency funding.

Hurricane Maria struck the island on Sept. 20, 2017, decimating its power grid and setting off what has been called the longest blackout in the history of the U.S. Almost all of Puerto Rico's nearly 1.6 million customers lost power after the hurricane made landfall, and only about 43% of the island's typical peak load was restored within two months of the storm.

Puerto Rico Gov. Wanda Vázquez Garced in October 2019 unveiled a $20.3 billion, 10-year plan to restore, update and decentralize the island's electric grid. Earlier in 2019, the island territory's government approved a staged renewable energy standard of 40% renewable energy by 2025 and 60% by 2040.

"LUMA will take a tailored approach to the operation of the electric T&D system, with a focus on improved reliability and resiliency to severe weather events, through the implementation of emergency preparedness and response plans and the further modernization of the electric T&D system," Houston-based Quanta Services said in a news release.

Because of LUMA Energy's structure, Quanta said will not recognize revenues and operating expenses related to LUMA on its income statement, but will record its 50% portion of LUMA's earnings within "Equity in Earnings of Unconsolidated Affiliates" on its income statement.

Still, Quanta expects its interest in LUMA Energy to be accretive to earnings per share by approximately 25 cents per share annually upon full transition to LUMA.

The P3 Authority reportedly estimates more than $18 billion of capital investment could be required to upgrade Puerto Rico's electric grid through 2028.

LUMA Energy will be led by President and CEO Wayne Stensby.

"Through LUMA, we'll not only provide safe, reliable and affordable electricity service, we'll expedite this electricity transformation in a way that delivers lasting benefits to the people and communities on the island," Stensby said in a written statement.

Among other things, LUMA Energy will build a campus for Quanta-owned Northwest Lineman College in Puerto Rico for its existing and future workers.