FINANCIAL OVERSIGHT AND MANAGEMENT BOARD

FOR PUERTO RICO

Members
Andrew G. Biggs
Carlos M. García
Arthur J. González
José R. González
Ana J. Matosantos
David A. Skeel, Jr.

José B. Carrión III

Chair Natalie A. Jaresko
Executive Director
BY ELECTRONIC MAIL

December 12, 2019

Astrid I. Rodríguez Cruz

General Counsel
Puerto Rico Electric Power Authority

Re: Linesmen Agreement

Dear Ms. Rodríguez-Cruz:

In accordance with the contract review policy of the Financial Oversight and Management Board for
Puerto Rico (“FOMB”) established pursuant to Section 204(b)(2) of PROMESA, we have reviewed
the proposed agreement between the Puerto Rico Electric Power Authority (“PREPA”) and Unión de
Trabajadores de la Industria Eléctrica y Riego (“UTIER”) (the “Proposed Agreement”) that would
entail increase in linesmen salary, recruitment of new linemen and continuing safety training, among
others.

After reviewing the Proposed Agreement, the FOMB concludes “Approved with Observations”.
Observations related to the proposed agreement are set forth in Appendix A attached hereto.

Please note that our review is solely limited to the compliance of the Proposed Agreement with the
applicable fiscal plan and no other matters. For the avoidance of doubt, the review performed by the
FOMB does not cover a legal review of the contractual documentation or the contracting process,
including without limitation: (i) compliance with contracting requirements under applicable laws,
rules, and regulations, both federal and local and (ii) compliance with applicable laws, rules, and
regulations governing procurement activities, both federal and local. In addition, the FOMB has not
engaged in any due diligence or background check with respect to the contracting parties nor whether
the contracting parties comply with the requirements under the applicable contract.

This letter is delivered as of the date hereof and we reserve the right to provide additional observations
and modify this letter based on information not available when the review was conducted. In addition,
during the course of our review, we may receive information which we may determine to refer to the
relevant authorities.

This letter is issued only to PREPA and solely with respect to the Proposed Agreement.
Sincerely,

Jaime A. El Koury
General Counsel
Appendix A

PREPA - UTIER

Fiscal Plan Alignment

This review covers the Proposed Agreement to be entered between the Puerto Rico Electric Power
Authority and the Unión de Trabajadores de la Industria Eléctrica y Riego (“UTIER”). According to
the information provided by PREPA, the Proposed Agreement would increase linesmen salaries by
15% for FY20 and 5% for each of FY21 and FY22. By February 2020, PREPA also anticipates the
recruitment of 80 additional linesmen. According to PREPA, the cumulative financial impact for the
Proposed Agreement is $7.2 million. This impact includes both the new hires and salary increases.
Additionally, the Proposed Agreement stipulates linemen must receive safety training every two (2)
years.

Based on Q1 FY20 actuals provided by PREPA (assumed to be representative of one fourth of

projected FY20 spend), PREPA’s projected spend in GridCo personnel – before increased hiring or
salary increases – is $17.4M below the amount provided for in the FY20 certified Budget for PREPA.
This excludes expected pension cost for both actuals and budget. PREPA stated that the proposed 15%
increase in salary for linesmen for FY20, together with the addition of 80 new linesmen would imply
an increase in FY20 actual cost of $4M (also excluding pensions), resulting in a forecast FY20 spend
that is $12.6M below budget. With additional 5% increases in salary for FY21 and FY22, GridCo
personnel expenses would also be below-budget in FY21 and FY22.

Based on the information received and reviewed, PREPA’s certified Fiscal Plan and FY20 Budget
provides sufficient funding for it to increase hiring across its labor force with the intention of reducing
overtime pay and improving workplace safety. PREPA proposes that the recruitment of new linemen
and awarding of salary increase be implemented using the amounts budgeted for personnel recruitment.
In doing so, PREPA will have reduced funding to hire the full amount of resources it originally deemed
necessary to reduce overtime and improve workplace safety. Regardless, PREPA will continue to be
expected to deliver reductions in overtime expenditures and workplace safety, particularly around
linemen duties, given increased availability of personnel. The Oversight Board will continue to monitor
PREPA’s performance and compliance with the targets outlined in the certified Fiscal Plan.

This approval is conditioned on PREPA submitting to the Oversight Board, by December 20, 2019, a
revised Q1 FY20 budget to actual report reflecting only actual cash expenditures during the relevant
quarter (which has not been pro-rated to evenly spread out the extra pay period in Q2 across Q1 and
Q2). This requirement shall also apply to future quarterly and year end budget to actual reports
submitted to the Oversight Board.

This contract review was conducted on the basis of information submitted by the Government of the
Commonwealth of Puerto Rico. The Financial Oversight and Management Board for Puerto Rico has
not independently verified the information included in the submission. Should FOMB become aware
of any inaccuracies or misrepresentations – whether intentional or not – it would re-evaluate its
assessment.