In the face of President Hugo Chavez’ nationalization drive, AES Corp. of the United States agreed February 8 to sell its 82 percent stake in the country’s top private utility, Electricidad de Caracas (EDC), to the Venezuela government for US$740 million.
Valuing EDC at US$900 million, Venezuela’s energy minister said minority stakeholders could retain or sell their shares to the state in an operation it planned to complete by April 30.
Chavez’s nationalization push in the past month, which also includes the No. 1 telecommunications company and major foreign-run oil assets, has raised concerns about his plan to create a socialist economy in the fourth-largest exporter of oil to the United States. (HNN 1/12/07)
But, at a ceremony to sign a memorandum on the purchase, AES President Paul Hanrahan said the takeover had followed Venezuelan law and been a fair process.
AES paid US$1.6 billion for its stake in EDC and then invested another US$600 million over six years, he said.
“We strongly believe in Venezuela and in EDC as a company,” Hanrahan said, speaking through an interpreter at a ceremony at the presidential palace.
Electricidad de Caracas, which distributes electricity around the capital, has labored under government controls banning it from raising rates to customers despite double-digit inflation. It has also been dogged by widespread theft of its supply throughout some of Caracas’ shantytowns.
Those problems had led economists in Venezuela to predict AES would receive much less for its stake than it had originally paid. At the signing, the government and AES said AES’ stake in the power company was 82 percent. In recent weeks, the government had said the company owned an 87 percent share.
The share price of EDC closed February 8 — before the announcement of a deal — at 550 bolivars (26 US cents).
The Venezuelan state is already heavily involved in the hydro-rich power sector, dominating generation. EDC was by far the biggest private company in the sector, which also includes regional utilities.