BY ELECTRONIC MAIL

December 7, 2021

Mr. Nelson Morales

Chief Financial Officer
Puerto Rico Electric Power Authority

Dear Mr. Morales:

We write in response to your letter of November 23, 2021, in which you requested the Oversight
Board to approve the reprogramming of $45 million from the “Voluntary Transition Program
(“VTP”)” line item to the “T&D Operator Cost” line item in the FY2021 Certified Budget for the
Puerto Rico Electric Power Authority (“PREPA”) (the “Certified Budget”). The purpose of the
reprogramming is to enable the “payment of remaining obligations to LUMA Energy LLC for
costs incurred during the Front-End Transition (“FET”) Period, as well as the post-commencement
Service Fee for the month of June 2021.”

According to your letter, LUMA incurred approximately $45 million in additional transition
expenses unrelated to LUMA’s management fee. As described in your letter, and by LUMA in its
filings before the Puerto Rico Energy Bureau (“PREB”), LUMA incurred these additional
expenses because of the lack of, among other, recent and relevant operational and industry standard
training for PREPA employees, increased absenteeism prior to LUMA’s service commencement,
and multiple security threats to employees and blockages to physical access to equipment and
materials. These transition expenses exceed the $135 million Front-End Transition Fee budgeted
for in the Certified Budget, 1 based on a best-available estimate of Front-End Transition Service
Fee. However, PREPA has $45 million in unspent funds because fewer PREPA employees than
expected participated in the VTP program, choosing instead to transition to central government
agencies. PREPA proposed to use those unspent VTP program funds related to the transition to
pay for these additional transition expenses.

1
LUMA’s Front-End Transition Service Fee was budgeted for under the “T&D Operator Fee” line item in PREPA’s
Certified Budget.
Mr. Nelson Morales
December 7, 2021
Page 2 of 2

After carefully reviewing PREPA’s request, the Oversight Board authorizes the reprogramming
from the VTP-related transition costs to reimburse LUMA Energy for other transition related costs
incurred in the last fiscal year 2021, given the Puerto Rico Public-Private Partnership Authority’s
(“P3A”) approval and PREPA’s obligation under the OMA to pay such invoices, and with the
intent of furthering the transformation of Puerto Rico’s energy system pursuant to the Oversight
Board’s authority under PROMESA. Details of PREPA’s reprogramming request can be found in
Appendix A.

Pursuant to Section 4.6 of the T&D Operation and Maintenance Agreement, the actual amount of
the Front-End Fee would ultimately vary based on actual work performed. The Oversight Board
recognizes that the Front-End Transition Service Fee was based on best-estimates and actual costs
can vary, particularly under the difficult environment in which LUMA operates. LUMA’s regular
Service Fee, on the other hand, is defined through a fee schedule agreed to under the OMA.
Therefore, after June 1, 2021, LUMA’s fees are no longer subject to variability contemplated for
the Front-End Transition Service Fee.

Ensuring compliance with the Certified Budgets is crucial to the fiscal responsibility that the
people of Puerto Rico expect and that PROMESA mandates. The Oversight Board expects that
PREPA and LUMA will abide by the Certified Budgets going forward.

At the same time, reforming Puerto Rico’s energy system is critical for the island’s economic
future and to improve the quality of life for all residents. LUMA and PREPA must do everything
in their power to further the transformation to provide more reliable and more affordable energy.

We look forward to working with you to for the benefit of the people of Puerto Rico.

Sincerely,

Natalie A. Jaresko

CC: Eng. Josué Colón Ortiz

PREPA Governing Board
Hon. Omar Marrero Díaz
Mr. Wayne Stensby
 APPENDIX A
(Page A-1)

Approved Reprogramming

Line Item Certified Revised Actual Cost Variance Reprogramming

FY21 Budget Requested
T&D Operator Costs $135,000,000 $180,000,000 ($45,000,000) $45,000,000
Voluntary Transition Program (VTP) $85,000,000 $28,000,000 $57,000,000 ($45,000,000)
Total $220,000,000 $208,000,000 $12,000,000 -