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Puerto Rico utility PREPA negotiates two new supply contracts

By Rory Carroll

SAN FRANCISCO, Aug 25 (Reuters) - The Puerto Rico Electric Power Authority, or PREPA, has entered into two new contracts for supplying fuel and natural gas to its power plants, arrangements that will lead to substantial savings, the utility said on Tuesday.

PREPA, which produces and distributes practically all the electric power used in Puerto Rico, has entered into a no. 6 fuel oil supply contract with Freepoint Commodities LLC, which the utility said will save it $25 million in decreased fuel adder charges during its initial one-year term.

It also signed a Natural Gas Aprovisionamiento SDG, S.A supply contract for its Costa Sur Power Plant with Natural Gas Fenosa, which PREPA said will lead to estimated savings of about $30 million per year compared to its current arrangement.

It expects to begin receiving deliveries under both contracts on October 1.

"Both the Freepoint contract and the Natural Gas Aprovisionamiento contracts are important steps in PREPA's ongoing transformation," said Javier Quintana-Mendez, executive director of PREPA.

"These new contracts also provide PREPA with a secure supply of fuel for the duration of the contracts," he said.

The deal comes as PREPA negotiates with creditors over more than $8 billion in debt, according to reports.

(Reporting by Rory Carroll; Editing by Cynthia Osterman)