Puerto Rico braces for Hurricane Maria after Irma's $1 billion bill
(Bloomberg) --Two weeks ago, Puerto Rico was spared a devastating hit when Hurricane Irma ripped up the Caribbean. This time, it may not be so lucky.
The bankrupt island, already contending with the aftermath of a storm that left as much as $1 billion of damage and hundreds of thousands still without power, faces even more upheaval with Hurricane Maria set to hit as soon as Tuesday night. The government ordered rationing of basic necessities, including water and batteries, although those items were already gone from some San Juan store shelves as residents prepared for what could be the worst storm for the U.S. territory in decades.
The island is mostly insured by local firms, though has been seeking more international interest, according to a report published last year by the commonwealth’s commissioner of insurance’s office. Universal Insurance Group of Puerto Rico is the No. 1 provider of home coverage on the island, with almost 62 percent market share, according to data compiled by ratings firm A.M. Best. MAPFRE North America Group, ranked second with 22.5 percent of the market, is a unit of Spanish insurer Mapfre SA.
“If you are in a flood zone or in a wood house, your life is in danger,” Governor Ricardo Rossello said during a press conference Monday in San Juan. “There has never been an event like this in our history in the last 100 years. Our call is for all citizens to move to a safe place.”
Puerto Rico is facing an active hurricane season with little financial ability to navigate a natural catastrophe. It filed for bankruptcy in May after years of economic decline and borrowing to fill budget gaps. A series of defaults have effectively left it unable to raise money in the capital markets. And its aging government-owned electric utility, the Electric Power Authority, is also operating under court protection from creditors. Puerto Rico’s emergency fund stood at about $32 million before Irma passed through.
Prepa, the government-run utility, is still trying to restore power to hundreds of thousands of residents after its electrical infrastructure sustained as much as $400 million of the nearly $1 billion of damage from Irma. It was already in need of upgrades because it relies on oil to produce most of its electricity and the median plant age is 44 years, more than twice the industry average.
“We will not have sustainable electric infrastructure in the near future,” Rossello said. “We will be bringing in crews from outside of Puerto Rico to attend to these measures.”
Hurricane Maria became a Category 5 storm late Monday with maximum winds of 160 miles per hour, according to the National Hurricane Center. The island is anticipating 10 to 18 inches of rain, with as much as 25 inches in certain areas. Puerto Rico’s Luis Munoz Marin International Airport in San Juan is set to close Tuesday at 7 p.m. The island’s Convention Center in San Juan, the largest in the Caribbean, is sheltering people who are bedridden or have special needs.
Rossello’s administration has opened nearly 500 shelters throughout the island and may set up more. Water, batteries, baby food and generators were already scarce in San Juan by Monday evening and motorists waited at least half an hour in line to buy gasoline. Officials estimate the last time the island withstood such a powerful storm was in 1928 with Hurricane San Felipe.
Maria’s threat hasn’t rattled the bond market, given that Puerto Rico has already defaulted and is seeking to have some of its debts discharged in bankruptcy. While its securities were actively traded as the storm gathered force, Puerto Rico debt maturing in 2035 changed hands Tuesday at an average price of 57.5 cents on the dollar, in line with where they’ve traded over the past couple of weeks.