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Amid Energy Crisis, Buyout Considered

November 30, 2007

Though a handful of foreign energy companies have expressed interest in buying part of Nicaragua’s problematic power-distribution system run by Spanish company Union Fenosa, there are still no solid offers on the table, according to authorities at the Ministry of Energy and Mines.

Union Fenosa became the first private company to acquire a contract to manage part of the country’s energy grid in 2001. Since then the company has claimed it is losing money in Nicaragua, while consumer activist groups here argue the Spanish firm has not lived up to its side of the contract as it has failed to provide reliable service or invest in the expansion and modernization of electricity coverage.

President Daniel Ortega has long been a critic of Union Fenosa, claiming the privatization was a mistake in the first place. Now the government, in conjunction with Venezuelan interests, is reportedly interested in buying out the contract, although no official offer has yet been made.

“If there was an offer to go with, we’d be interested,” ministry spokeswoman María Santos told The Nica Times last week.

News of the government’s interest in the buyout comes as the second slap in the face to the beleaguered energy distribution company after it signed a “cease-fire agreement” with the government last August, which committed both sides to work together to resolve the country’s energy crisis.

Earlier this month at the Summit of Latin American and Iberian leaders in Chile, President Ortega publicly slammed Union Fenosa, alleging that the Spanish company is mafia-like and that most Nicaraguans “are against it.”

Fenosa has been butting heads with the government for years over the country’s inefficient power production, payment problems and the government’s softness toward energy theft and fraud.

Most consumers, meanwhile, have been subject to an energy crisis that has meant daily blackouts for the past year.

Interested foreign investors reportedly include companies based in the United States, Brazil, Europe and the state-run Venezuelan Electric Corporation. A delegation of Venezuelans recently visited the country to look at the buyout option, according to Santos.

The government, too, has reportedly been considering the possibility of buying out the distribution company as a last resort. Union Fenosa, however, says no offers have been made and that it is unaware of any government plans to buy out the company.

For the moment, Santos said, the government’s top priority is putting an end to the power-rationing blackouts, which the administration has promised will end by Dec. 1.

 

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