CATEG Management Contract

cancelled

In November 2006, Electricidad de Valencia (Eleval) signed a five year management contract to operate CATEG, Ecuador’s power generation and distribution company for southern Guayaquil. The terms of the contract allowed for a one-time five-year extension. In 2006, CATEG had a generation capacity of 213 MW and approximately 400,000 connections in its distribution network. Eleval outbid the Colombian multi-utility EPM and US firm Southern Light & Gas Company. Eleval was to receive approximately US $4.4 million (2.2%) of Categ’s estimated US $180 million turnover per year for their services. Eleval’s consortium was comprised of its subsidiaries Electricidad de Valancia Capital and Valencia Electricity Corp. As of January 2007, Conelec, Ecuador’s electricity regulator, appointed a temporary administrator of CATEG and had not ceded control of CATEG to Eleval. The administration of President Alfredo Palacio signed the contract with Eleval in 2006, but the new administration of President Correa challenged its validity in 2007 and considered terminating the contract. In July 2007, President Correa signed a decree creating Guayaquil electric power unit Udelec, a state owned enterprise that replaces Categ, the "temporary administrator" of Guayaquil-based generator and distributor.