Sunday, December 30, 2012

Bolivia: Governmental Nationalization of Foreign Utilities Continues, Spain Targeted

President Evo Morales announced yesterday (December 29) the nationalization of four Bolivian units of Spanish utility Iberdrola, including the main electricity distributors in La Paz and Oruro provinces.

Reportedly, Morales justified the nationalization of the four Spanish companies on the basis that urban consumers pay less than one cent per kilo-watt hour compared to rural users who pay 23 cents per kilo watt.

COMMENT: In its announcement on the nationalization, no mention was made as to whether the Bolivian government had approached the Spanish subsidiaries on reducing the cost charged to rural consumers.

The nationalization decree applies to power distributors Electropaz and Elfeo, services company Edeser and investment firm Compañia Administradora de Empresas.

Although the government said it will hire an independent auditor to determine the amount of compensation to be paid to Iberdrola, it should be noted that La Paz has yet to compensate another Spanish utility, Red Electrica Española, on compensation for the nationalization in May 2012 of its stake in power distributor TDE.

Bolivian state utility ENDE will assume control of the four former Iberdrola units.

At the moment, only Bolivia and Argentina have nationalized Spanish entities in Latin America of late. Neither government has compensated those entities for the takeovers.