Distribuidora de Gas Pampeana SA

distressed

Distribuidora de Gas Pampeana SA was one of the eight companies created in 1992 from the distribution assets of Gas del Estado, an Argentinean state-owned company. Distribuidora de Gas Pampeana was privatized in December 1992, when a 70% equity stake was sold for $235.4 million to Camuzzi Gazometri SPA of Italy, Grupo CG Arg. (a company of the Argentine industrial group Bunge & Born), and Sodigas Pampeana SA. The consortium paid US$18 million in cash and US$217.4 million in debt papers valued at their market value. Sodigas Pampeana owned 25% of Distribuidora de Gas Pampeana SA. Later, the government retained a 10% equity stake to be sold to company employees, at the same price per share that the winning consortium paid. The remaining 20% equity stake was separated to be sold in the domestic capital market. The winning consortium assumed other liabilities that amounted to $55 million. The winning consortium was awarded with a 35-year concession period and the option to extend for an additional ten years, as long as service quality indicators and investment obligations stipulated in the contract were met. In March 1996, Sodigas Pampeana sold a stake of 12.5% of Distribuidora de Gas Pampeana SA to Sempra Energy International (USA). That stake was sold jointly with a 12.5% equity stake of Distribuidora de Gas del Sur for $48.5 million. In October 2000, Sempra Energy acquired an additional 21.5% stake in Sodigas Pampeana from Dominion resources (Sempra previously owned another 21.5% stake in the company). Also in October 2000, the government sold its remaining stake in the company in the stock market, raising US$ 73.3 million in divestiture revenues. In 2002, Sempra filed legal proceedings in an international arbitration tribunal (International Centre for Settlement of Investment Disputes - ICSID) against the Argentinean government for freezing rates. In 2003, the italian Camuzzi also filed legal proceedings in the same tribunal against the Argentinean government, driven by frozen rates and losses with Argentina's currency devaluation. In 2007, an award had been rendered to Sempra althought the Camuzzi case was still pending. For updates on the international arbitration proceedings, check http://www.worldbank.org/icsid (cases # ARB/02/16 and ARB/03/2). Contract investment obligations indicated that the company should invest sufficiently to meet the required standards during the first five concession years. Those standards 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. During the period 1993-97, Distribuidora de gas Pampeana invested $117 million of which $37.4 million was allocated to improve the security of its distribution facilities. The remaining $79.6 million were invested in expanding its distribution network and improving the quality of its services. In 1998, the company invested US$ 26.2 million, in 1999 it invested US$ 23.9 million, and in 2000 it invested US$ 35.1 million.