Empresa Generadora Itabo

distressed

In August 1999, a private consortium comprised of an affiliate of Coastal Power Co., and GENER S.A. (Chilgener) of Chile, which in turn was owned by AES Corporation of the US., successfully bid for a 50% stake in Empresa Generadora de Electricidad Itabo (EGE Itabo), with a bid of US$177.8 million. Coastal Power was to hold 49.99% ownership and GENER was to hold 50.01% ownership in the private consortium. EGE Itabo was one of two power generation companies that were capitalized by the Government. In 2000, MIGA provided a US$90 million guarantee to the sponsor for its equity exposure in the project. The consortium implemented a US$ 50 million investment plant (the sponsors committed to increase the generation capacity by 100 MW in 18 months). In 2001 the generating capacity of EGE Itabo increased through a $125 million investment. EGE Itabo operated six thermal plants with nominal capacity totaling about 586 MW located at various sites near Santo Domingo (Itabo included the two 125 MW Itabo units that operated on fuel oil or coal; the 64 MW Santo Domingo plant; and the Los Mina and Timbeque units). This capacity equalled one-third of the Dominican Republic's peak electrical demand. In the third quarter of 2008, EGE Itabo sold four of its seven gas turbines. As a result, as of Dec. 31, 2008, Itabo owned and operated two coal-fired units and one gas-fired unit with a combined installed capacity of 295 MW. In 2001, El Paso Corporation acquired Coastal Power along with Coastal's 25% stake in EGE Itabo. In May 2006, AES purchased El Paso's 25% share in the generator, giving AES a 50% share in EGE Itabo and full operational control of the project company's assets. During 2004, the electricity sector in the Dominican Republic entered in a financial crisis. Although it was vulnerable for years, the 2004 economic downturn, financial crisis and an increase in fuel prices that essentially caused the financial collapsed of the sector. Specifically, the inability to pass through higher fuel prices and the costs of devaluation led to a gap between collections at the distribution companies and the amounts required to pay generators for electricity generated. By December 2004, the company indicated that there were no assurances that those issues would be resolved in its favor. Negotiations to overcome the crisis were taking placing including the IMF and the World Bank and the private electricity sector. The key issues to negotiate included (i) the failure to provide for full pass through of the costs of electricity supply to consumers; (ii) the failure of the regulator to follow through on subsidy commitments, which had put the distribution companies in the position of effectively financing portions of the subsidy programs; and (iii) the fiscal deficit of the government to reconstitute the sector. Should we track Commit. Inv. in Facilities? Private sponsors own 50%. Is that considered a controlling stake? Year % Private Inv. in Gov. Assets Commit. Inv. in Facilities 1999 50% 177.8 0 2000 50% 0 50 2001 50% 0 125