Venezuela purchases utility for $739 million

CARACAS, Venezuela – President Hugo Chavez’s government clinched the nationalization of Venezuela’s largest private electric company Thursday, signing an agreement to buy a controlling stake in Electricidad de Caracas from its U.S.-based owner, AES Corp., for $739 million.

The agreement to pass the company’s 82-percent stake in the utility to the Venezuelan government was signed by Paul Hanrahan, president and chief executive of Arlington, Va.-based AES, during a ceremony at the presidential palace in Caracas.

The final contract will be signed Monday, and AES’ shares will be transferred to state oil company Petroleos de Venezuela SA – or PDVSA – within 30 days, Energy Minister Rafael Ramirez said.

“We are very satisfied with this agreement. This agreement from our point of view respects the interests of both parties. It is an acceptable amount,” said Ramirez, who is also president of PDVSA.

AES has invested at least $2.3 billion in EDC since taking control of the company. It paid $1.7 billion for its stake in 2000 and subsequently invested another $600 million in the company, Hanrahan said.

“It wasn’t in our plans to part with EDC. It’s with a heavy heart that we part with EDC,” he said. “It is one of the best utilities in Latin America.”

But he said AES respected the Venezuelan government’s decision to take control of the electricity sector.

“It has been a fair process,” he said. “It respected the rights of the investors.”

The deal marks the first of multiple nationalization moves planned by Chavez since he was re-elected in December, pledging to deepen his socialist revolution. The leftist president also plans to nationalize other smaller companies in the electrical sector, oil projects operated by companies like Chevron Corp. and Exxon Mobil Corp., as well as the country’s largest telephone company, CA Nacional Telefonos de Venezuela, which is 28.5 percent-owned by New York-based Verizon Communications Inc.

Chavez has called the nationalizations vital to Venezuela’s strategic interests, but the moves have alarmed his critics who fear that he’s steering his country toward communism like that of his Cuban mentor, Fidel Castro.