12 April 2002 – After a series of delays, Ecuador finally cancelled the planned auction of seven state-owned electric utilities after the withdrawal of the three interested bidders – effectively abandoning privatizations plans for the industry.

The seven Group B coastal companies were the only remaining out of an original 17 distribution companies in which the government hoped to sell 51 per cent stakes. The involvement of private interests was intended to stimulate investment and allow for the sell-off of generating and transmission assets.

Public opposition and the refusal of the Quito Municipality to sell its blocking share in Empresa Electrica Quaint meant the sale of the ten Group A highland companies had to called off in March.

Ricardo Noboa, president of the National Modernisation Council (CONAM) and brother of President Gustavo Noboa, told reporters that the three potential buyers for the Group B companies, Union Fenosa of Spain, AES of the United States and Pecom of Argentina, decided not to bid due to resistance from local municipalities and legal uncertainty.

The Constitutional Tribunal declared the sale illegal in 2001 and the court’s consequent failure to clarify its position, Ricardo Noboa said, left potential investors open to a legal “ambush” after the sale.

“The auction to sell is suspended and the modernization process is now directed toward hiring international administrators,” said Noboa.

The government now plans to open up the administration of as many of the state’s distributors as possible to bids from private companies, although Mr Noboa said a date has not yet been set for that process.

“Ecuador urgently requires investment in electricity generation and there will not be investment in generation if the distributors are not in private hands,” Mr Noboa said. “If it is not possible to sell the shares of the distributors, putting the administration in private hands is a stimulant to those who are interested in investing in generation.”

AES and Pecom’s involvement in the auction had been in doubt for several months due to their reported financial problems and political opposition to the sale has increased steadily.

The government also announced the postponement of the re-privatisation of the Ecuador Electric Company (EMELEC), which distributes electricity to the port city of Guayaquil, from April 29 to mid-May.