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Italy's ENEL To Control Panama Hydro Company

by Mike Godfrey, for, New York

08 February 2007

Italian electricity company Enel has doubled its stake in Panamanian electricity supplier Fortuna, giving it effective operational control of the company. Fortuna generates about 30% of Panama's power with its hydroelectric plants, and has extensive interests in other Central American countries.

Panama, which imports about 70% of its total energy needs, privatized its electricity sector in 1998; there is a 'pool' market in which wholesale electricity prices are set dynamically.

Enel said it paid US$161.3m for the additional indirect 24.45% stake in Fortuna, taking its overall share to 49%; the government retains 49.9% of the company, and the balance of 1.1% is held by Fortuna's pension fund. Enel had previously paid US$150m in 2006 for holding company Hydro Quebec International Latin America, giving it a 24.55% share in Fortuna.

Enel says that it sees the Panamanian market as part of the larger Central American power market, 'which is experiencing extensive development characterised by economic and regulatory integration'. Enel has also acquired hydroelectric plants in Costa Rica, Guatemala and Chile.

Fortuna's hydroelectric operations are in the heavily forested, mountainous western region of Panama, where it operates an hydroelectric plant of 300 MW of installed capacity in the Chiriqui province.

In 1998 the former state owned utility, IRHE, sold a controlling interest in its power plants and its distribution grids to a group of US, Canadian and Spanish investors. AES, Enron, Constellation, Coastal, HydroQuebec, and Union Fenosa paid a total of US$600m for 50% of the sector. The government has received substantial dividend and tax flows from the privatized industry, while expansion has been privately financed to the tune of US$1.5bn.

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