(Adds statements from board chair)
July 12 (Reuters) - Five of the seven board members of the bankrupt Puerto Rico Electric Power Authority resigned on Thursday, effectively leaving the utility with no leadership amid a massive restructuring effort following the devastation wrought by Hurricane Maria.
The resignations came a day after PREPA named Rafael Diaz-Granados, an independent member of the authority's board, as chief executive starting July 15. They followed a statement from Puerto Rico Governor Ricardo Rossello on Thursday telling the board to reduce Diaz-Granados' $750,000 annual salary or resign.
"The salary granted by the governing board of the Puerto Rico Electric Power Authority to the new executive director is not proportional to the financial condition of PREPA, to the financial situation of the government, or to the feeling of the people who are making sacrifices to raise Puerto Rico," the governor said.
In a letter to Rossello, the resigning board members said they did not believe they have support to undertake "politically unpopular tasks" needed to change PREPA from within.
"The political forces in Puerto Rico have provided a definitive statement that they want to continue to control PREPA," the letter said. "When the petty political interests of politicians are put ahead of the needs of the people, the process of transforming the Puerto Rican electricity sector is put at risk."
The letter was signed by PREPA Chair Ernesto Sgroi, Vice Chair Edwin Irizarry, and independent board members Erroll Davis, Nisha Desai and Diaz-Granados, who was tapped to replace current CEO Walter Higgins. Higgins resigned on Wednesday, effective July 14. The resignations leave Maria Palou and Christian Sobrino on the board.
Palau, an employee of the executive branch in Puerto Rico, had agreed late Wednesday to resign from the board and cede her seat to Higgins. Neither Palou nor Higgins could be reached for comment.
Sgroi said the board struggled to find candidates to run PREPA independently and was fortunate when Diaz-Granados agreed to take the position.
"It will be difficult to carry that company without a strong board and strong CEO - to effectively run that company separate from government influence - that is the main factor in trying to transform PREPA, Sgroi told Reuters.
He added that the resignations let the governor "choose board members that are more in tone with his agenda."
The authority is tasked with restoring and upgrading the island's electric grid, which was completely knocked out by Hurricane Maria in September 2017, exposing years of poor maintenance and management. The utility has been through four CEOs since the hurricane.
The resignations come at a time when several thousand homes and businesses still lack power, and as PREPA is years away from fundamental improvements needed to withstand another hurricane.
The U.S. Army Corps said this week it would remove three generators, which provide backup at Puerto Ricos power plants, as soon as next week. The Corps had previously agreed to leave them in place until PREPA agreed to buy them.
PREPA, which has more than $14 billion in liabilities and is going through a privatization process, has largely patched together its system, which serves about 1.5 million homes and businesses. An exodus of residents since the hurricane has left an older population on an impoverished island.
The U.S. commonwealth is in federal court trying to restructure roughly $70 billion of debt.
(Reporting by Karen Pierog in Chicago, Nick Brown and Jessica Resnick-Ault in New York; editing by Daniel Bases and James Dalgleish)