TIDM43XA
RNS Number : 8173Z
Gas Natural Capital Markets S.A.
17 March 2017
GAS NATURAL FENOSA URGES THE GOVERNMENT OF COLOMBIA TO QUASH THE
MEASURE OF THE SUPERINTENDENT OF RESIDENTIAL PUBLIC SERVICES
-- The measure adopted by the Colombian authorities is contrary
to the spirit of the deepening of trade relations between the
European Union and Colombia under the Free Trade Agreement and has
a negative impact on the climate required to propitiate flows of
international investment.
-- Gas Natural Fenosa reaffirms its willingness to maintain an
open dialogue with the Government of Colombia to reach an agreement
that, by providing the company with an adequate regulatory
framework, establishes the necessary legal and economic regulations
to allow it to continue operating Electricaribe, and to carry out
the appropriate Investments.
-- The Colombian government cannot ignore the fact that
Electricaribe has been suffering from a chronic situation of fraud
and non-payments for many years, totalling 1.3 billion euros. The
solution requires the establishment of a secure and reasonable
legal framework.
-- Electricaribe's investment between 2011 and 2015 amounted to
255 million euros, which could have been three times greater if it
had been able to count on government measures to address the
serious problem of fraud and non-payment noted above.
GAS NATURAL FENOSA regrets the decision announced today by the
Superintendent of Residential Public Services of Colombia to
liquidate the company Electricaribe and calls on the Colombian
authorities to quash this measure and to work to find a
satisfactory solution and, above all, one which is sustainable for
the provision of electricity supply in the area.
The decision of the Superintendent obviates the fundamental
problem and is in contradiction of the public statements made by
the Chairman of Electricaribe and the special agent on the
deficiencies of the current legal and regulatory framework.
Electricaribe is a regulated company and as such supplies all
the customers in its area under the conditions that the government
determines at any particular time. The current regulatory framework
does not take into account the specificities of the Caribbean area
and the problems it presents.
Thus, they have reported that with the current regulatory
framework they expect to end 2017 with a deficit of 85 million
euros and have publicly stated that: "the culture of non-payment
has to be changed, by setting an example from governmental bodies"
(Edgardo Sojo, Current Chairman of Electricaribe, appointed by the
Superintendent, March 8, 2017).
Gas Natural Fenosa reaffirms its willingness to maintain an open
dialogue with the Government of Colombia to reach an agreement
that, by providing the company with an adequate regulatory
framework, establishes the necessary legal and economic regulations
to allow it to continue operating Electricaribe, and to carry out
the appropriate Investments.
The decision to liquidate Electricaribe is contrary to the
process of dialogue that, in recent months, the multinational has
maintained with the Colombian authorities, always with the
objective of reaching an agreement satisfactory to all parties and
one that solves the critical situation that the Colombian company
is experiencing, derived from the regulatory insecurity existing in
the country due to the fraud and non-payment suffered.
The measure adopted is also contrary to the spirit of the
deepening of trade relations between the European Union and
Colombia under the Free Trade Agreement and has a negative impact
on the climate required to propitiate international investment
flows to that country.
The order for the company's liquidation is clearly a step in the
opposite direction to the principles advocated by the Organisation
for Economic Co-operation and Development (OECD), of which Colombia
is a candidate for accession. The OECD promotes the development of
stable regulation that protects the correct functioning of the
investments in the member countries, something that is not being
fulfilled in Colombia in the case of Electricaribe.
Given this situation of faits accomplis, GAS NATURAL FENOSA has
no choice but to accede to an international institution to resolve
the situation created in the manner provided for in the bilateral
Agreement on Reciprocal Protection of Investments between Spain and
Colombia, a recourse it has been voluntarily putting off so
far.
Situation of delays in payment and fraud permitted by the
Government
The lack of importance attributed by the Superintendent who
dictates the liquidation to the very serious problem of delays in
payment and fraud is surprising The need for more investments in
the area is a recognised fact, but there is a tendency to ignore
that the fundamental reason is that Electricaribe is owed more than
1,300 million euros by its customers (more than 200 in 2016 alone),
according to audited figures which include large debts by Colombian
public agencies, and this is so because there is no regulatory
framework that sufficiently protects the interests of the
electricity company and prevents it from being forced to supply
power without being able to charge.
To all of the above must be added the existence of fraud for an
amount exceeding 100 million euros per year. The company has filed
more than 16,000 complaints (5,000 in the last 2 years), which
obtained only 85 convictions.
It is a flight of fancy to say that the management of the risk
of fraud or non-payment is in the hands of Electricaribe.
Despite the magnitude of the figures, despite audits to that
effect and the numerous written reports to various official bodies,
and the fact that the Colombian State owns 14% of the equity (it
fell from 30% to 14% when it did not take part in equity increases)
and has two representatives on the Board of Directors, the
Colombian Authorities and especially the aforementioned
Superintendent, have not taken the necessary measures to prevent
the collapse of the company due to the lack of adequate regulation
and legal security.
The Electricaribe company was acquired by Union Fenosa in 2000;
in 2009, GAS NATURAL FENOSA acquired Unión Fenosa, and since then,
and in a continuous manner, it has been warning the Colombian
Government of the grave situation and the continued deterioration
of the electricity distribution company in the face of the problem
of late payment and fraud. Since the start of the investment, more
than 800 million euros have been invested from Spain in
Electricaribe, and no dividend has ever been paid.
The pretension of the Superintendent that the current problem of
Electricaribe can be resolved simply by increasing the equity of
the company makes no economic sense and avoids facing the
fundamental problem. Electricaribe is a regulated company and -
naturally - must have all the necessary capital required, provided
that the regulation and legal security allow it to obtain the
income necessary to maintain and develop its business, and to
obtain a reasonable profit. These circumstances today do not exist
for Electricaribe.
The forced deconsolidation of the company
GAS NATURAL FENOSA has already been forced to deconsolidate its
shareholding in Electricaribe by reclassifying it, as required by
accounting regulations, as a financial asset for its book value of
475 M EUR. Obviously, the international claim for damages will be
made for the entirety of its fair market value, which is much
higher.
With more than 170 years of history, GAS NATURAL FENOSA is the
leading gas distributor in Latin America and the fourth distributor
of electricity. The multinational supplies energy to eight of the
10 principal cities in Latin America.
Barcelona, March 14, 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
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