Press Releases 2010

Nationalisation of Controlling Stake in Guaracachi

Details

Published: Saturday, 01 May 2010 17:54

1st May 2010

Rurelec plc (AIM:RUR) ("Rurelec" or "the Company"), the power plant developer and owner-operator of power generation assets in Latin America, announces that it has today been informed that the Bolivian Government has taken steps to nationalise by force Rurelec's controlling stake in Empresa Electrica Guaracachi SA ("Guaracachi").  The move comes as part of a May Day programme which saw all three of the privatised power generations companies forcibly brought into state ownership by means of a Supreme Decree signed by President Evo Morales, together with one regional distribution company and the national electricity transmission company.

This surprise move was taken in the face of assurances given to the British and French ambassadors in La Paz at the end of last week that the Morales Administration continued to want to maintain European private investment in the power sector.  Furthermore, during the same week, the Morales Administration stated publicly that it expected to reach negotiated agreement for a public-private partnership with the electricity generators.  Such an approach would permit even greater investment in new power plants by Rurelec and its subsidiaries.

Since President Morales came to office in 2006, Rurelec has invested over US $110 million in new power capacity of 185 MW in five separate projects involving eleven new turbines or gas engines. 

Rurelec's shares in Guaracachi are held through a wholly owned holding company subsidiary called Guaracachi America Inc ("GAI").  The book value in Bolivia of the Guaracachi shares held by GAI is US $65 million (£42.5 million).  Additionally GAI is due to receive US $5.5 million (£3.6 million) in dividends declared by Guaracachi. The Supreme Decree issued by President Morales on 1^st May requires GAI to transfer all of its 50.001 per cent. stake in Guaracachi to ENDE, the state power company and states that ENDE must pay fair value ("compensacion adecuada") for GAI's shares.  The Supreme Decree gives ENDE 120 days to formulate its fair value proposals to GAI.

Rurelec enjoys full protection of its investment in Bolivia as a result of an investment treaty between Bolivia and the United Kingdom which came into force in 1990.  The Agreement for the Promotion and Protection of Investments was signed in La Paz on 24^th May 1988.  This treaty protects all British companies and guarantees payment of market value in the event of compulsory state nationalisation of their investments in Bolivia.  Rurelec is believed to be the third largest British investor in Bolivia after BP and BG.

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