Hoy newspaper says that Union Fenosa (UF) and the Dominican government will sign today for the return the management of the Edesur and Edenorte power distributors to the Dominican government. According to the newspaper’s sources, the company will keep its mid-level management during the two-month transition period. El Caribe reports in its “En la cosa” column that the top salaried positions, held by Spanish UF executives, would be eliminated, in order to reduce company spending.
Hoy newspaper reports that UF agreed to reduce its requested US$70-million payment for capital investments and loan reimbursements to US$54.3 million.
The government also acknowledges outstanding debts of Edenorte and Edesur totaling US$460 million, with a breakdown as follows: UF’s Palamara/La Vega power generation subsidiaries, US$177 million; the Inter-American Development Bank, US$139 million, commercial banks, US$47 million.
Hoy reports that the deal calls for the government to take on a US$346.1-million debt, of which US$15 million would be immediately paid, and another US$331.1 million settled over a 12-year period with accumulating interest payments. Through its subsidiary Didoel, UF would recoup the amounts owed, as per the 12-year usufruct agreement, with the revenues generated by the best-paying clients of the power distribution companies.
UF affiliates reportedly owe US$100 million to the other power generation companies, and at this point it appears the government will be assuming this debt.
The agreement was reached on 10 September, prior to President Hipolito Mejia’s trip to Spain, where, in the presence of King Juan Carlos, head of Spanish government Jose Maria Aznar and key UF executives, he vowed to honor the arrangements made.
As per the privatization act, the government has one year in which to find another business partner. An audit is being conducted to evaluate the financial worth of the renationalized distribution companies.
Overall, the Union Fenosa privatization was a bad deal for the Dominican Republic. The government now is buying back for much more the distribution part of the energy sector. Dominican taxpayers will eventually pay for the bad deals made in the energy sector by government. Since 1999, residents in the Dominican Republic have also had to endure increasingly expensive and deficient service, despite promises that service would decline in price and improve in quality with privatization.