Turbines, Palo Seco Power Plant, Puerto Rico

Shutts & Bowen has advised a Jacksonville-based APR Energy Inc. on a complex $35 million contract that will enable the company to provide mobile natural gas power turbines to hurricane-ravaged Puerto Rico and keep an existing power plant running.

APR Energy provides mobile turbines to areas hit by natural disasters such as hurricanes, earthquakes and tsunamis. It focuses on regions where needs are immediate, where the government can’t afford more permanent plants, and where changes in weather patterns have rendered existing wind or hydroelectric plants insufficient.

Negotiating in the wake of the devastating hurricane was far from easy. Although APR employees who specialize in assessing power needs arrived in Puerto Rico on one of the first flights to the island after Hurricane Irma struck, Shutts partner Harold Patricoff stayed in Miami to assist in the contract talks because of the lack of resources on the island.

Cell phone service was spotty and calls were often dropped. Background noise was loud, and the people needed for the negotiations often were addressing other needs simultaneously. Sometimes it was hard to just get the right person on the phone, Patricoff said.

“Those people were under tremendous demand and stress to address many, many problems,” Patricoff said. “The contract was negotiated under very difficult circumstances in a large conference center with many people having discussions about many things. There were a lot of different needs that were being discussed at the same time—medical care, food, fuel. Power was just one need. There was a lot of discussion about what kind of relief could be covered by U.S. Government relief funds.”

Despite the obstacles, the Shutts & Bowen team was able to assist APR Energy in negotiations with FEMA, the Army Corps of Engineers, the Puerto Rico Electric Power Authority and Weston Solutions, to supplement a power plant in Palo Seco so that it can keep running at 256 megawatts.

The plant, located outside of San Juan, has been shutting off automatically because it can’t provide enough power. Other plants in the region are down due to hurricane damage, Patricoff said.

The two turbines will supply another 56 megawatts of power. Together with the existing equipment, the 256 megawatts should provide power to about 256,000 customers when it comes online. That is expected to occur within two weeks, Patricoff said.

The two semi truck-sized turbines arrived in Puerto Rico by ship Friday and are in the process of being installed at the Palo Seco plant. The two turbines were among four that left for Puerto Rico in anticipation of the need—before the $35.1 million contract with Pennsylvania-based Weston Solutions, for which APR subcontracts, had been negotiated.

Puerto Rico could have used as many as 15 of the turbines, Patricoff said. The government may still contract for more, depending on the availability of funding and how officials choose to use aid for the island’s many emergency needs.

Puerto Rico wanted as much power as it could get, but available funds also had to be used for medical care, food, water, roads and the power line grid. The negotiations involved determining the number of turbines that could be provided with the funding available, how long they would be used, which site would get them, and how they would be paid for.

The contract was signed two weeks after the company arrived to assess the damage and only four days after APR was awarded the turbine deal, Patricoff said. FEMA is paying for the turbines and has an agreement with the Puerto Rico Electric Power Authority, Patricoff said.

Similar-sized contracts generally take up to a month to negotiate, but Patricoff said he’s handled other deals for APR that required a quick turnaround, such as after the disastrous 2011 earthquake and tsunami in Japan. He said APR has also just reached a deal to ship turbines to areas of Mexico hit by a recent earthquake.

“Each emergency is unique to the place and the people where the disaster occurs,” Patricoff said. “The damage was so profound in Puerto Rico that there were all kinds of needs—not just energy.”

In addition to Patricoff, the Shutts team included partners Al Smith and Dario Perez of the Miami office and Joe Goldstein of the Fort Lauderdale office.

The Puerto Rico Electric Power Authority was represented by Greenberg Traurig shareholder Nancy Mitchell in Chicago.