Jan. 10 (Bloomberg) -- Venezuela will offer compensation to the oil, power and telephone companies that may lose assets in President Hugo Chavez's nationalization plans, the head of the National Assembly Finance Committee said.

``Confiscation, expropriation are banned words in our dictionary,'' Ricardo Sanguino, the committee's chairman, said in a telephone interview. ``We will be tough but fair negotiators. There are legal mechanisms in the Constitution that give support to our plan.''

Venezuela's stocks and currency rebounded from yesterday's declines. The Caracas Stock Exchange index rose 6.1 percent, recovering from its biggest drop ever, while U.S. shares of CA Nacional Telefonos de Venezuela, which Chavez plans to nationalize, gained 20 percent in New York trading. The country's benchmark bond also rose, snapping four days of declines.

Chavez's plan calls for taking control of foreign joint oil ventures in the country's Orinoco Belt through buyouts, not expropriation, Sanguino said. Another option would be paying companies for the value of their stakes after deducting owed taxes or unpaid licensing rights, he said.

Nationalization of utilities and oil ventures would move Venezuela toward reversing the legacy of previous governments, which sold $5 billion in state companies and opened Venezuelan markets to foreign investors. Chavez, who took the presidential oath of office today to begin a second, six-year term, said Dec. 8 that industries he deems strategic to national interests, such as electricity and communications, will be returned to state control.

Chavez today pledged to spend the term implementing socialism in South America's third-largest economy. A spokeswoman for Chavez' office declined to comment on Sanguino's remarks.

Shareholder Compensation

``Building Venezuela's way to socialism, that's the only way to redemption,'' Chavez, 52, told congressmen and officials gathered for his inauguration at the National Assembly building in Caracas.

Under the plan, the government will compensate shareholders of companies such as Caracas-based telephone company Nacional Telefonos, or Cantv, which was sold to foreign investors several years ago, Sanguino said. Investors will be paid a ``fair'' price for their holdings, he said.

The plan also may include taking over utilities founded and owned by private investors -- such as AES Corp.-controlled CA Electricidad de Caracas, Sanguino told journalists in Caracas after Chavez' inauguration. He reversed comments made earlier today in which he ruled out that Electricidad would be nationalized.

Rule by Decree

Based on yesterday's market prices, AES's 85 percent stake in Electricidad is worth about $750 million. New York-based Verizon Communications Inc.'s 28.5 percent stake in Cantv is worth about $185 million.

``Venezuela isn't a newcomer in this nationalization business,'' Sanguino said in the interview, referring to the process of nationalization spearheaded by former President Carlos Andres Perez in the 1970s. ``We know how to implement. It will be good for our country.''

Chavez will introduce legislation this week requesting powers to make law by executive order. Passage of the legislation, which would grant the president authority to nationalize utilities and oil ventures with foreign companies and scrap the central bank's autonomy, won't take more than two weeks, Sanguino said.

Strategic Industries

BNP Paribas SA said in a report that under the plan the government may reserve its sole right to participate in so- called strategic industries or declare them of strategic importance -- allowing the armed forces to take over companies as would be permitted in the case of an emergency. The last legal option, BNP said, would be to pass an all-encompassing nationalization bill.

The move goes far beyond steps Chavez has taken in the past three years to raise taxes or renegotiate contracts with foreign oil producers, analysts said. Companies will probably wait until terms of the bill are unveiled to enter negotiations.

``There's still room for negotiating,'' said Daniel Linsker, a political analyst at London-based Control Risks Group, in an interview. Oil and telecommunications companies ``have invested billions of dollars in their Venezuelan operations. It is very unlikely that they pull out just because of fear.''

Oil projects in the Orinoco Belt have so far attracted $17 billion in investment by foreign oil companies, more than any other part of the country. About 600,000 barrels a day are produced from its tar-like deposits. Companies with investments in the basin include Irving, Texas-based Exxon Mobil; BP Plc; and Chevron Corp. of San Ramon, California. Other investors include Statoil ASA of Norway.

Currency

The Caracas Stock Exchange Index jumped 5.8 percent to 53,345.78. It fell 11 percent yesterday after local shares of Cantv dropped 30 percent, their steepest decline ever. Trading of Cantv will be suspended until Jan. 12. Trading of Electricidad was also halted after its shares slid 20 percent yesterday. It reopens tomorrow.

The bolivar, set by the government at an official exchange rate of 2,150 per dollar, traded at about 3,700 per dollar in the unregulated market, up 8 percent from about 4,000 bolivars per dollar yesterday, traders said.

The yield on the government's benchmark 9 1/4 percent dollar bonds due in 2027 fell to 7.07 percent from a one-month high yesterday. The bond price, which moves inversely to the yield, gained 0.45 cent on the dollar to 123.45 cents, according to JPMorgan Chase & Co.

To contact the reporter on this story: Guillermo Parra-Bernal in Caracas at gparra@bloomberg.net

Last Updated: January 10, 2007 15:02 EST