Mammoth Energy says government owes it $227 million over Puerto Rick storm work
While it fights lawsuits over its power restoration contracts in Puerto Rico following the 2017 Hurricane Maria, Oklahoma City-based Mammoth Energy says it is still owed $227 million by the U.S. government. It is also warning shareholders and investors of possible harm to its income-making abilities should it lose some of the lawsuits.
In a Form 10-K filing the company made with the Securities and Exchange Commission, it laid out details of its legal challenges including a lawsuit filed in January 2020.
The power restoration contracts were obtained through Mammoth’s subsidiary, Cobra Acquisitions LLC in 2017 with the Puerto Rico Electric Power Authority. The first contract, for one year was for payments up to $945 million. A second contract obtained in the spring of 2018 was to include payments up to $900 million.
Mammoth’s work under each of the contracts ended in March of last year. But as of Dec. 31, 2019, the company stated that PREPA still owed $227 million including $42 million interest charges on the delinquent balances.
But criminal indictments were returned in September 2019 against the former president of Cobra and eventually PREPA filed for bankruptcy. The indictments accused the former president with conspiracy, wire fraud, false statements and disaster fraud.
While demand for Mammoth’s work has grown since its power restoration work in Puerto Rico, the company stated in its SEC filing that should it not get the $227 million it is owed, operations and cash flows would be “materially and adversely affected.”
“We have not obtained, and there can be no assurance that we will be able to obtain, one or more contracts with PREPA or other customers to replace the level of services that we provided to PREPA under our previous contracts,” stated the company.
“The outcomes of investigations and litigation relating to our contracts with PREPA may have a material adverse effect on our business, financial condition, results of operations and cash flows.”
Mammoth was hit with three class-action lawsuits filed in June and August of 2019 in the Western District of Oklahoma City federal court. One complaint was dismissed in January 2020, while a consolidated amended shareholder derivative complaint was filed January 17, 2020.
It was followed January 21, 2020 by a lawsuit filed by Mastec Renewables Puerto Rico,LLC in U.S. District Court in the Southern District of Florida. Mastec maintains it suffered the loss of $500 million in contracts because of the alleged actions of Cobra.
Mammoth said it will “vigorously” defend the actions but warned investors “if one or more of the investigations and lawsuits is determined adversely to us, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.”
Source: SEC filing