Puerto Caballo had long been a self-governing territory of Equestria, but this state of affairs was upended with the return of Nightmare Moon and her takeover of Equestria. A junta consisting of Loyalist exiles and local Loyalists led by the Captain of the Puerto Caballan Royal Guard Buckio Buckista seized control of Puerto Caballo and the Summer Islands. Buckista then proclaimed the formation of the Equestrian Provisional Government, which claimed to be the legitimate government of all of Equestria.

Nightmare Moon immediately ordered an invasion of the islands. After hastily assembling a landing force, the first attack commenced 19 October 1000 only for it to result in a dramatic Lunar defeat. The most well-known battle of the invasion was the Battle of Marfilita, occurring in a small undefended coastal village of no more than 1000 ponies. A force of 200 Lunar Marines was landed aiming to establish a beachhead, only to be literally pushed back into the sea by two Loyalist exiles wielding powerful magical artefacts, Fenris Ebonyglow and Kara Waypoint, who led a small citizens’ militia in defence of the village. After the battle, Ebonyglow and Waypoint were photographed in the centre of Marfilita posing with the newly designed EPG flag, and the photo instantly became a famous piece of Loyalist iconography owing to the fascinating story.

A second invasion was launched on 6 January of the next year. The second invasion saw more success with Lunar Marines successfully establishing a beachhead, but due to a poorly prepared supply network and the tenacity of Loyalist forces, Lunar forces were forced to withdraw. All Lunar forces had left Puerto Caballo by 26 March.

Following the failed invasions, the conflict entered a frozen state as the Kingdom of Aquileia guaranteed the sovereignty of the EPG. The Lunar Empire quietly backed off, not seeking to get involved in an intercontinental war it was ill-prepared for. However, given the instability of Aquileia, it was uncertain whether this guarantee would last.

Crucially, the Loyalist exiles now had time to prepare for the inevitable. One night the Empire will strike again, and the last soldiers of the true Princess will be ready.