Distribuidora de Gas Metropolitana SA

Distressed

Failure

Distribuidora de Gas del Sur SA, or Metrogas, was one of the eight companies created in 1992 from the distribution assets of Gas del Estado, an Argentine state-owned company. Metrogas, the largest of Argentina's eight gas distribution companies, served a population of six million (21% of the Argentine population) in the city of Buenos Aires and its southern suburbs in 1992. The company was privatized in three stages. In the first one (December 1992), a 70% equity stake was sold for $300 million to British Gas (28.7%), Cia. Naviera Perez Companc (17.5%), Astra Capsa (14%), and Invertrad (9.8%). The last member of the winning consortium was an Argentine Private Development Trust. The consortium paid US$44 million in cash and US$256 million in debt papers valued at their market value. The winning consortium also assumed liabilities of $177 million. In a second transaction (November 1994), a 20% equity stake was sold through public offering for $121 million. In that transaction British Gas acquired a 5.3% equity stake of Distribuidora de Gas Metropolitana. Since then, British Gas has acquired a 34% equity stake in Metrogas. The remaining 10% equity stake was retained to be sold to Metrogas' employees, at the same price per share that the winning consortium paid. The winning consortium was awarded a 35-year concession period with the option for extension for an additional ten years, as long as service quality indicators and investment obligations stipulated in the contract were met. During the period 1993-97, Metrogas invested $277.8 million of which $126.8 million was allocated to improve the security of its distribution facilities. The remaining $151 million were invested in expanding the transmission network and improving the quality of services. In mid-2000, the EIB granted a US$ 50 million loan to finance a gas transmission pipeline and a gas distribution grid. Metrogas sold US$ 100 million in bonds in Mar. 2000 and is also planning to issue an additional US$ 130 million in bonds (the resources will be used to pay off short term debts). In June 2010, the Argentine government placed MetroGAS under the management of state-owned Energas, after the company filed for bankruptcy protection. The company was to remain under government control until it has successfully restructured its debt. The ministry rejected the company's claims in a filing to the stock exchange that its debt problems were due to the government's failure to raise tariffs and blamed the company's "obstinate refusal" to give up its arbitration claim at the ICSID for not renegotiating its public service contract to date. Contract investment obligations indicated that the company's investment should be sufficient to meet the required standards, which were based on US standards but adjusted for conditions in Argentina. The conditions for the extension of concession periods were the same for all privatized gas distribution companies.

Energy

World Bank Group

Project

Commercial, Natural Gas, Cable car, Telecommunications, Power Transmission, Government, Manufacturing (Industrial), Forest Products and Packaging, Power Generation (CCGT), Automotive