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Argentina Threatens to Seize Edenor, Edesur on Blackouts

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Dec. 19 (Bloomberg) -- Argentina will step in to take over electricity distribution service in the capital if companies don’t resolve blackouts sparked by record demand during a heat wave this week, Cabinet Chief Jorge Capitanich said.

Empresa Distribuidora y Comercializadora Norte and Empresa Distribuidora de Energia Sur SA are responsible for the blackouts and need to invest to improve services or risk losing their concessions, Capitanich said in Buenos Aires. Edenor slid as much as 22 percent to 2.11 pesos after his comments to close 15 percent down at 2.30 pesos.

“We’ve told them emphatically that if they aren’t able to provide proper service the government will,” Capitanich, flanked by executives from the companies, said. “There are no excuses.”

President Cristina Fernandez de Kirchner has continued the legacy of her predecessor and husband Nestor Kirchner of subsidizing utilities while failing to increase tariffs for companies struggling to keep the lights on with annual inflation of more than 25 percent. Fernandez seized a 51 percent stake from Repsol SA in oil producer YPF SA last year to stem fuel imports and has nationalized $24 billion of pensions funds and an airline since taking power in 2007.

The electricity distributors known as Edenor and Edesur have depended on government funds to remain in business due to fixed customer electricity prices for four years in Buenos Aires and the surrounding area. Last year, the companies received a 250 million-peso ($39 million) payment into a government-controlled trust for investment.

Burning Trash

Edenor, controlled by Pampa Energia SA, and Edesur, owned by Italy’s Enel SpA, each received a 28 percent rate increase in 2007 and another 10 percent raise in 2008.

Edenor and Edesur failed to keep up with this week’s record electricity demand as a heat wave that brought temperatures of 98 degrees Fahrenheit caused scattered blackouts across the city. Residents burned trash and tires in the streets in affected neighborhoods to protest the outages.

Veronica Gysin, Edenor’s investor relations official in Buenos Aires, wasn’t available to comment her assistant said. Myriam Spasari, a press official at Edesur, declined to comment.

Last month Capitanich said the government may make high income families pay more for utilities while keeping subsidies for poor households. Yesterday he said the government can’t provide all public services.

The distributors must also respond to client demands by answering calls from customers who have lost power.

“Tariffs aren’t the issue,” Capitanich said.

To contact the reporter on this story: Pablo Gonzalez in Buenos Aires at pgonzalez49@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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