Ecuador power company privatization fails

30 May 2002 – The Ecuadorian government’s latest efforts to privatize electricity utility Emelec failed on Monday as none of the three eligible bidders submitted valid proposals.

Argentina ‘s Perez Companc SA was the only company to submit a bid, but was disqualified as the proposal lacked the necessary technical information. Spain ‘s Union Fenosa SA and AES Corp. of the US the other two pre-qualified bidders, decided not to participate in the auction.

Emelec serves around 340 000 users, supplying about 37 per cent of the electricity needs in the coastal city of Guayaquil, the country’s largest port and economic engine.

The minimum asking price for the auction had been set at $130m, with an additional $100m in investments required in the first ten years of the concession. The winner would have also been required to pick up the tab on $55m in back wages.

Jose Luis Llorden, representative for Union Fenosa in Ecuador, said that the decision to withdraw from the bidding process was made late last week. The Spanish company had determined that Emelec didn’t justify the investment, the official said, citing the payroll debt and high minimum bid price. The government two years ago removed Emelec’s concession to distribute and sell electric energy in Guayaquil, saying that the company would be re- privatized as soon as possible. The bidding process has been postponed five times over the past year.

Emelec was owned by Fernando Aspiazu, a banker who has been in jail since 1999 after being convicted of tax evasion. He also faced an array of charges of supposed mismanagement during his time as president of Banco del Progreso, which has been closed since March 1999.

The government had hoped to use about $90m of the receipts from the privatization of Emelec to return the deposits of Banco del Progreso account holders.

Jorge Trujillo, president of Ecuador ‘s National Electrification Council, said Tuesday that the group is now analyzing alternatives for Emelec and to return money to Progreso depositors.

One of the options under discussion is to transfer control of the utility to the municipality of Guayaquil.

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