WASHINGTON, D.C., November 18, 1998 ---
The restructuring and privatization of Panama's state-owned electricity
company, Instituto de Recursos Hidráulicos y Electrificación (IRHE), was
completed today with the sale of four electricity generation companies.
The companies were created as a result of the restructuring of IRHE
earlier this year, which accompanied the establishment of a competitive
electricity generation market.
The four electricity generation companies sold for a total of US$302 million.
Forty-nine percent of the shares of Empresa de Generacion Electrica Fortuna
were awarded to Americas Generation Corporation (a consortium formed by
Coastal Power and Hydro-Quebec) for $118 million. Forty-nine percent
of the shares of Empresa de Generacion Electrica Bayano and Empresa de
Generacion Electrica Chiriqui were sold to AES Corporation for $92 million.
Fifty-one percent of the shares of Empresa de Generacion Electrica
Bahia Las Minas were awarded to Enron International for $92 million.
In September, the three electricity distribution companies were sold: 51
percent of the shares of Empresa de Distribucion Electrica Metro-Oeste
and of Empresa de Distribucion Electrica Chiriqui were sold to Union Fenosa,
a power group from Spain for $212 million. Fifty-one percent of Empresa
de Distribucion Electrica Noreste was sold to Constellation Power, a wholly
owned subsidiary of Baltimore Gas & Electric, for $89 million.
The results of the sale place IRHE's distribution and generation assets
at a total value of $1.45 billion, including approximately $250 million
in debt which will be transferred as part of the sale. At the same
time, electricity tariffs have been reduced by an average of 10 percent.
IFC advised the Government of Panama on the structuring and implementation
of the privatization of IRHE. The proceeds from these transactions
will go to a government trust fund for investment in social sector programs.
Fernando Aramburu Porras, President of COMVA (the government commission
responsible for the sale of IRHE), said he was delighted with the outcome
of this privatization, both in terms of the value generated and the quality
of the investors that participated in the process.
The sale generated excellent results and represents a vote of confidence
by the investor community in Panama's future, said Reyaz A. Ahmad, Manager
of IFC's Corporate Finance Department.
The electricity privatizations are part of a broader government program
to modernize the economy and improve infrastructure services. The government
of Panama has privatized port operations and the telecommunications company.
An independent regulatory agency has also been established to oversee
tariff and service levels in the electricity, telecommunications, and water
IFC's Corporate Finance Department specializes in providing financial advisory
services for strategic sales and privatizations. IFC, part of the
World Bank Group, fosters economic growth in the developing world and emerging
market economies by financing private sector investments, mobilizing capital
in the international financial markets, and providing technical assistance
and advice to governments and businesses.