WASHINGTON D.C., September 18, 1998 ---
The International Finance Corporation recently advised the government of
Panama on the privatization of three electricity distribution companies,
which were sold last week for a total of US$301 million.
Based in part on IFC advice, the government of Panama sold a 51 percent
stake in Metro-Oeste Company, Chiriqui Company, and the Noreste Company
-- three electricity companies that collectively serve 454,000 customers
across the country.
Metro-Oeste and Chiriqui were awarded to Union Fenosa, a power group from
Spain at a bid of $212 million for 51 percent of the shares. Noreste
Company was awarded to Constellation Power, a wholly owned subsidiary of
Baltimore Gas & Electric, at a bid of US$89 million for 51 percent
of the company's shares. Ten percent of shares in the distribution companies
are reserved for purchase by employees at a 6 percent discount to the price
offered by the strategic investors.
The distribution companies were created as a result of the restructuring
of Panama’s state power company Instituto de Recursos Hidráulicos
y Electrificación (IRHE) and their sale marks the first phase of the country's
privatization of the energy sector. IFC is also advising on the second
and final phase of the government's privatization plan for the industry,
involving the sale of four generation companies scheduled for the end of
October. Proceeds of the privatization will go to a program of government
investment in social sectors.
The privatization, which yielded prices substantially above the government’s
minimum prices, represents a vote of confidence from international investors
in the economy of Panama, said Dr. Fernando Aramburú Porras, the president
of the IRHE privatization commission. This is especially significant
in the present turmoil in the world's financial markets.
Reyaz Ahmad, manager of IFC’s Corporate Finance Services Department
said the privatization will not only result in better service but also
lower tariffs for consumers.
The electricity privatizations are part of a broader government program
to modernize the economy and improve infrastructure services. The government
has also privatized its port operations and telecommunications company,
and an independent regulatory agency has been established to oversee tariff
and service levels in the electricity, telecommunications and water
IFC, part of the World Bank Group, fosters growth in the developing world
and emerging economies by financing private sector investments, mobilizing
capital in the international financial markets and providing technical
assistance and advice to governments and businesses.