Unión Fenosa, Gov’t Finally Reach a Deal

June 6, 2008

After months of tensions with the Sandinista government, Spanish electricity provider Unión Fenosa agreed to cede 16 percent of its shares to the government in an agreement that will free Fenosa of more than $11 million in debt.

Union Fenosa Vice President Honorato Lopez Isla and Nicaragua Energy and Mines Minister Emilio Rappaccioli signed the agreement last week. The agreement must be approved by the National Assembly for it to enter into effect, according to Fenosa spokesman Jorge Katin.

“It was agreed that the debt owed is $11.5 million, which will be excused in exchange for (16 percent of) shares,” said Katin, who sat in on the negotiations.

Under the agreement, President Daniel Ortega will be able to appoint a chair member on Fenosa’s board of directors, though the government hasn’t yet said who it will appoint.

The Ortega administration has maintained that Fenosa has failed to invest in the impoverished country’s electricity infrastructure and has contributed to the crippling energy rationing that regularly leaves residents without power.

The agreement doused flaring tempers over the dispute between Fenosa and the government.

“Union Fenosa has demonstrated a will to reach an understanding,” Nicaraguan-Spanish Chamber of Commerce President Jorge Escalante said last week before the agreement was reached.

During six hours of talks that led up to the signing, Fenosa agreed to drop international arbitration claims against the government, while the government agreed to withdraw claims against Fenosa.

Ortega’s chief economic adviser, former rebel commander Bayardo Arce, called for the Nicaraguan Water Company (ENACAL) to sit down with Fenosa in an attempt to find a solution to a legal dispute over losses the water company claims it has accrued due to Fenosa’s power outages.

Fenosa also agreed to invest $33 million to improve the country’s electricity infrastructure by 2011.

“Now it’s up to Ortega to send (the agreement) to the National Assembly to be approved as law,” Katin said.

 

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