La Paz takes over Spanish electric company, EU concerned
By Lénaïc Vaudin d’Imécourt | Wednesday 02 May 2012
The Bolivian government is nationalising the local unit of Spain’s Red Electrica (REE), President Evo Morales announced, on 1 May, as he sent army troops to take control of the company’s headquarters in Cochabamba. The move comes only two weeks after neighbouring Argentina decided to seize the oil company YPF, a subsidiary of Spanish Repsol, angering both Spain and the EU, which threatened to fire back.
“The European Commission is concerned by the Bolivian government’s decision to nationalise the Empresa Transportadora de Electricidad,” trade spokesman John Clancy said, adding that the Commission was closely monitoring the situation. “We trust the Bolivian authorities will fully uphold their investment agreements with Spain and ensure prompt and adequate compensation for this expropriation,” he added, as “actions like this one necessarily send a negative signal to international investors over the business and investment climate in Bolivia”.
Morales signed a decree, on 1 May, which will allow the country to take over the local electricity provider Transportadora de Electricidad (TeD), of which 99.9% is indirectly owned by REE, through its subsidiary Red Electrica Internacional. Echoing Argentine President Cristina Kirchner’s words, Morales justified the expropriation by arguing that REE had failed to invest sufficient funds in TeD since it acquired it in 2002. “This Spaniard international company has barely invested US$81 million in 16 years, an average investment of five million per year,” Morales said during his official May Day address. On the other hand, the government “invested US$220 million in generation and others profited. For that reason, brothers and sisters, we have decided to nationalise electricity transmission,” he added.
The expropriation of REE’s assets follows the adoption of a bill by the Argentine Senate that will allow the government to take over 51% of YPF’s shares, all owned by Spain’s Repsol. Once the bill is adopted by the country’s lower house – the vote is expected before the end of the week – the government will take over 51% of the expropriated shares, while the remaining 49% will be handed out to the country’s energy producing provinces.
However, according to Clancy, “there is no direct link between what is happening in Bolivia and the Repsol case in Argentina”. The Bolivian president has indeed announced that the country will offer fair compensation to REE’s shareholders, including the Spanish government, which owns 20% of the company. Spanish officials also refused to draw a parallel between the two cases. “The Bolivian president announced his government will reimburse the investments made by REE in the country. This attitude has led the Spanish government to deny any parallels between what happened with REE and the expropriation of YPF in Argentina,” an official statement said.