Empresa Distribuidora y Comercializadora Norte (EDN) SA, Argentina’s biggest power distributor known as Edenor, is negotiating the sale of assets to a group led by a former company executive as it seeks funds for debt payments, said a person with direct knowledge of the sale.
Salta Inversiones Electricas SA, created by Edenor’s former chief financial officer Rogelio Pagano and Venezuelan businessman Miguel Mendoza, is a prospective buyer of Empresa Distribuidora de Energia Norte SA and Empresa Distribuidora de Electricidad de La Rioja SA, or Edelar, said the person, who asked not to be named because talks are private.
Edenor, owned by Pampa Energia SA (PAMP), is attempting to sell assets for capital spending and to avoid a debt default after a decade-old freeze on utility rates and inflation that economists estimate at 24 percent caused Standard & Poor’s to cut its rating to CCC in June. The company, which must make interest payments in October, may make a decision on the sale in the coming days, the person said.
The company had a net loss of 89.4 million pesos ($20.6 million) in the first quarter compared with a profit of 252 million pesos a year ago. Edenor bonds that mature in 2022 have dropped 43.1 cents on the dollar, to 37.15 cents this year, sending the yield to a 29.4 percent. Borrowing costs for Latin American utilities fell 20 basis points to 5.88 percent over the same period, according to Credit Suisse AG’s LABI index.
Edenor sold Empresa Distribuidora San Luis SA for $27 million to Rovella Carranza in September and Empresa Distribuidora de Electricidad de Salta SA to Salta Inversiones Electricas, known as Siesa, in April.
Andes Energia, which has an option to buy 78 percent of Edelar for $20.2 million, last month sought a second extension of the option period. Edenor’s board is scheduled to discuss the extension request in a meeting next week. Siesa may buy Edelar if the Andes arrangement fails, the person said.
Pagano left Edenor in April for “personal reasons,” the company said in statement to the stock exchange. Mendoza is a former Ashmore Group Plc (ASHM) executive. Nobody at Siesa was available to comment, an assistant said by phone. Edenor spokesman Alberto Lippi declined to comment.
President Cristina Fernandez de Kirchner, who was re- elected to a second four-year term last year, has maintained electricity price caps first introduced during the country’s 2002 financial crisis and continued by her late husband and predecessor, Nestor Kirchner. The rates freeze prompted Paris- based Electricite de France SA to agree in 2005 to sell Edenor to a Buenos Aires-based fund controlled by Argentine businessman Marcelo Mindlin, which later acquired electricity transmitter Transener and it was renamed as Pampa Energia SA.
On July 12, the government appointed an administrator at Empresa Distribuidora de Energia Sur SA, or Edesur, after the company missed a 150 million-peso payment to power wholesaler Cammesa. The price caps drove gas pipeline company Transportadora de Gas del Norte SA to halt payments on $22.1 million of debt in 2008 and natural gas distributor Metrogas SA (METR) to file for bankruptcy protection in 2010.
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