Privatization tips november 1998
ARGENTINA – BRAZIL – CHILE – ECUADOR –
MEXICO – PANAMA – PERU – SPAIN – VENEZUELA
ARGENTINA
- The Economic Policy Secretary, Rogelio Frigerio, announced that the Government plans to sell 14.9% of the shares of the company Yacimientos Petroliferos Fiscales S.A. (YPF) to a strategic partner in January 1999. Privatized in 1993, the Government still holds 20.3% of the shares in YPF, the biggest Argentine oil company with a leading position in the sector, and hopes to receive some 2.7 billion dollars with the new privatization. A series of measures will be adopted for the sale in order to avoid the creation of a monopoly in the sector in view that a number of the firms interested in the purchase are already positioned in the Argentine market. The Spanish company REPSOL, as well as British Petroleum and the Italian company ENI have expressed an interest in YPF.
BRAZIL
- Brazil sold the last State-owned railway company, Maha Paulista, by auction on 10 November. The company was sold to the Ferrovía consortium for 205 million dollars. Ferrovía, will, in turn, invest an additional 250 million dollars over the next five years. The railway covers over 4,000 kilometers in the states of Sao Paulo and Minas Gerais, interconnecting the country’s principal railway lines.
- The National Economic and Social Development Bank (BNDES) has reported that in 1999 the regional government of the State of Paraná plans to privatize Banestado, the State-owned bank, COPEL, an electricity company, and SANEPAR, the company responsible for supplying water. The three companies were included in next year’s privatization programme for BNDES.
CHILE
- Twelve consortia have pre-qualified for the sale of 35% of the shares of Empresa Sanitaria de Valparaiso (Esval) and an operations concession. The minimum purchase price will be announced on 21 December with the reception of the final bids. The winner will keep 30% of the share capital for a minimum of five years and undertake a 250 million dollar investment plan. At the end of the process, the Production Development Corporation (CORFO), which is the entity responsible for the process, will reserve for itself 10% of the shares that will later be placed among the workers, while another 10% will be placed on the national securities market.
ECUADOR
- The Government of Ecuador hopes to collect about 1.5 billion dollars thanks to the privatization and capitalization programme planned for 1999. The president of the National Modernization Council (CONAM), Alvaro Guerrero, said that the programme includes 38% of the sale of the Ecuadorian Telecommunications Company, EMETEL, planned for the first quarter of next year. Likewise, the programme includes the privatization of the Ecuadorian Electricity Company (EMELEC) and some oil areas. Part of the income generated will be used to finance a solidarity fund aimed at efforts in the social area.
MEXICO
- The Ministry of Telecommunications and Transport reported this month that the sale of the first group of regional airports will be carried out on 26 November. The process was postponed until the end of the month at the request of the private companies interested in an in-depth study of the documentation. This first package of airports includes those of Cancun, Cozumel, Huatulco, Mérida, Minatitlan, Oaxaca, Tapachula, Villahermosa and Veracruz. The second group of airports to be privatized is located in the Pacific area and includes the cities of Guadalajara, Puerto Vallarta, Tijuana, San Jose del Cabo, Bajio, Morelia, Hermosillo, La Paz, Aguascalientes, Los Mochis, Mexicali and Manzanillo. The privatization of these installations us planned for February 1999.
- The Government modified the bidding scheme of the three companies – Fabricas de Papel Tuxtepec (FAPATUX), Mexicana de Papel Periodico (MEXPAPE) and Productora Nacional de Papel Destintado (PRONAPADE) – that form the Productora e Importadora de Papel, S.A. (PIPSA), in what is a second attempt to privatize the companies en bloc. It is hoped that the new scheme will guarantee the success of the bidding process which was declared invalid on 8 October by the Nacional Financiera (NAFIN) due to the fact that the bids submitted were below the minimum established price. NAFIN will receive the bids in a public act on 11 December.
PANAMA
- Three U.S. consortia were awarded the operation of four Panamanian electric generating companies on 18 November. With this, the Government ended the privatization process of the seven generating and distributing companies that belonged to the state-owned Institute of Hydraulic Resources and Electrification (IRHE). An eighth company, responsible for the transmission, will remain in the hands of the State. The consortium by the name of Americas Generation Corporation Corporation acquired 49% of the shares of the Fortuna hydroelectric company for 118.1 million dollars; Enron International Panama acquired 51% of the Bahia Las Minas thermoelectric company for 91.7 million; and Aes Panama Energy acquired 49% of the Bayano and Chiriqui hydroelectric companies for 91.7 million dollars. The purchase of the Chiriqui plant involves a sub-contract for 200 million dollars of the Mexican company Ingenieros Civiles Asociados for the construction of a hydroelectric plant. In September, the Panamanian Government had already privatized 51% of the shares of the Metro Oeste and Chiriqui distributors for 211.9 million dollars, awarded to the Spanish consortia Union Fenosa, and the Noreste distributor, awarded to the Constellation Power group for 89.8 million dollars.
PERU
- The Peruvian Government is taking steps to privatize the Talara refinery, owned by the state company Petróleos de Perú (PETROPERU), being also one of the biggest two in the country. The international public bidding for the refinery will be carried out during the first quarter of 1999. The operation contract will have a twenty-year duration and will be awarded to the investor that makes the highest bid. The winning investor will assume the operation of the refinery, keep all the income and be held responsible for all the costs, subject only to a fee to be paid to PETROPERU. Located in the port of the same name, 955 kilometers to the north east of the Peruvian capital, Talara has a production capacity of 62,000 barrels a day, surpassed only by the La Pampilla refinery – privatized in 1996 – which has a capacity of 100,000 barrels a day.
- The president of the Privatization Committee of the regional electricity companies, Manuel Kiyán, reports that the Electronoroeste, Electronorte, Electronortemedio and Electrocentro companies will be auctioned. The process will end on 15 December, the date when it is planned to hand them over to private hands.
- The Special Privatization Committee (CEPRI) reports that the sale of the Toromocho mine has been postponed until April 1999. In this way, the CEPRI hopes to give more time to bidders so that they can visit the mining installations and prepare the purchase bids. On the other hand, the government organization confirmed that at the end of November the mines of Canaraico (copper) and Jehuamarca (gold and silver), both in the Lambayeque department, will be auctioned; as well as the Winicocha mine in the Cuzco department.
SPAIN
- The President of the industrial participation enterprise by the name of Sociedad Estatal de Participaciones Estatales (SEPI), Pedro Ferreras, confirmed that approximately 15 companies will be privatized in 1999. Among these is the State-owned airline, IBERIA. In this regard, it should be noted that 20% of IBERIA's capital has already been promised to institutional investors; 8%, sold to British Airways; and 2%, sold to American Airlines, a U.S. company. The sale of other smaller but important companies is also being planned in an effort to streamline the Spain's public sector. The sales that are scheduled to take place before year end include: the sale of Potasas to the Israel company Dead Sea Work as well as the sales of La Seda and Tolsa, and Babcock Wilcox, a public equipment goods company, are planned. A public sale of up to 35% of the capital of the Red Electrica de España company is also planned.
- The SEPI will reopen the privatization process of the Babcock Wilcox company, since the only company interested, Norwegian Kvaerner, could not define the purchase. The U.S. company, MacDermott, and the German company, Steinmuller, are the new bidders.
VENEZUELA
- The Venezuelan Investment Fund (FIV), the body responsible for privatization processes, reports that 80% of the shares of the FESILVEN company had been acquired, via the bidding process, by the Spanish company, Ferroatlántica, for the amount of 19.6 million dollars. Ferroatlántica was the only one of five bidding companies that pre-qualified when it submitted its bid. The remaining 20% of FESILVEN will continue to be held by FIV and Corporación Venezolana de Guayana (CVG) in order to distribute it among the workers of this ferrosilicon-producing company whose annual capacity is 80 thousand metric tons. With this purchase, Ferroatlántica commits itself to making an investment of nearly 10 million dollars during the next three years.
- The president of Corporación Venezolana de Aluminio, Alfredo Rivas Lairet, indicated that the Venezuelan aluminum companies will not be privatized in 1998. Similarly, he indicated that new privatization modalities are being studied for these companies such as separate sales, the establishment of strategic associations or the sale of operating assets.
- FIV assured that the sale of the Electrical System of the states of Monagas and Delta Amacuro (SEMDA) is moving forward in accordance with the schedule. The President of FIV, Luis Alvaray Dreyer, manifested his optimism regarding the sale of company’s assets and stated that the process is under way. To date, agreements have been reached with the Commonwealth of Mayors and the tariff terms were replaced by the Data Room and due diligence, and the sales-purchase contract was delivered to the interested companies.
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