Empresa de Distribucion de Electricidad de Entre Rios SA

Cancelled

Failure

The company distributed electricity to an area of 54,781 square kilometers in the Province of Entre Rios in which it had 217,000 customers in 1996. Its service coverage was 75% under its concession area. The remaining 24,000 square kilometers of the Province were concession areas of cooperative companies. The company was privatized in two stages. In the first one, a 90% equity stake was sold for $160.9 million to CMS Energy (36%), Astra Energy (18.9%), Banco de Galicia y Buenos Aires (10.8%), Gualtieri Construcciones Empresa de Entre Rios (9.9%), Fondelec (6.7%), Williams International (5.4%), and Cooperativa Bariloche (2.2%). The remaining 10% stake was reserved for EDEER SA’s employees. The winning consortium was awarded a 40-year concession. This period has been divided into four management periods of ten years each. In 1997, EDEER SA contracted Union Fenosa ACEX to implement an advanced customer management system. In Dec. 2000, Public Service Enterprise Group (PSEG) Global acquired 90% of EDEERSA's shares by assuming US$ 80 million in debt and by paying US$ 200 million (the remaining 10% are held by the project company's employees). In March 2003, PSEG disposed of its 90% stake in EDEERSA by transferring its shares to an Argentine trust, which was expected to transfer ownership of the utility to EDEERSA's employees in five year's time. PSEG's disposal was in response to the Argentine government's conversion of electricity tariffs from dollars to pesos (effective January 2002) and corresponding unwillingness to renegotiate PSEG's contract to reflect financial losses from the conversion. PSEG filed suit against the Argentine government seeking damages. In November 2003, the Argentine government canceled the concession contract with PSEG claiming the company breached the agreement by unilateraly withdrawing from the project. The utility was transferred to the workers until the government was to launch a new tender. EDEER SA had 938-km of 132 kV, 2,381-km of 33 kV, and 5,356-km of 13.2 kV in 1996. During the six months preceding the end of a ten year management period, the new real tariff rates for the following five years be set up. Then, the regulatory agency will call for an international auction for the majority equity stake. This stake will be sold to the consortium that offers the highest price. If the winner is the current company owner, then this company will keep its stake in EDEER SA. Otherwise, current owner will sell its stake in EDEER SA to the winner of the bidding at the offered price.

Energy

World Bank Group

Project

Commercial, Power Generation (CCGT), Power Transmission, Government