Edesur’s intervention for 180 days reflects the delicate situation in which the Government finds itself after the mega blackouts that left without service and altered the daily life of more than 120,000 users: on the one hand, it has to comply with the demand to “do something” that reminds him daily of his militant base; but, on the other hand, he has to make sure that the private companies continue to lead the operation, both to avoid sanctions as for their own political expediency.
Thus, the measure is a political solution tailored to this crisis: it meets the demand for a political action with a strong symbolic content, but it does not alter the ownership of the company – nor does it displace the authorities in the operation. In this way, the Argentine State is covered from a possible legal dispute in international courts such as ICSIDwhere the country has a long tradition of losing lawsuits.
In fact, it is estimated that, due to the wave of lawsuits initiated in 2002, due to changes in the rules of contracts in privatized services, after the fall of the convertibility regime, the country ended up paying more than $1.2 billion. As of today, Argentina leads the ranking of countries sued in ICSID, with 56 cases.
The Government does not want to add one more case, and that is why it put special care in communicating that the owners of Edesur -where the Italian ENEL has the majority stake- do not have any reason to feel that your rights have been undermined.
The truth is that the fact that ENEL posted the sale sign for its businesses in Argentina last November added an extra note of suspicion. Among the conspiracy theories that have circulated in recent days, there was no shortage of those who argued that Edesur itself did not seem concerned with quickly resolving the crisis, and that this could be due to the fact that it was seeking some political negotiation regarding its situation in the country.
According to this version, the crisis would facilitate the rapid entry of new private shareholders. And specifically mentioned Nicholas Caputothe businessman friend of Mauricio Macri which was already a partner of ENEL. His name returned to the table in February, when a company of which he is a shareholder stayed with Central Costaneraone of the assets that the Italians had put up for sale.
Own Sergio Massa echoed those versions when justifying the intervention: “We have experienced situations that hit and hurt us, shops throwing away merchandise, and homes without electricity or water. These were the images that marked the agenda of the last 15 days. In this sense, ENEL’s imminent decision to put the company Edesur up for sale appears as a situation that generates uncertainty about the provision of the service”.
The adoption of forceful political measures was a demand of the Kirchnerist militant base, which had intensified with the protests over the blackouts
Before, a comparison that the presidential spokesperson, Gabriela Cerrutti, had established between the questioned Edesur and its competitor Edenor, of which he highlighted that “it had much fewer cuts”, despite having operated under the same rate conditions and with the same climatic emergency.
“At this point in the game, the company cannot claim anything, after having had the rates dollarized and with a rate increase of 3,000 percent during the government of Mauricio Macri, He never made the investments he had to make”said spokesperson Cerrutti, making clear the communication strategy focused on the lack of investment.
A “crescendo” at the request of the militancy
The measure of the intervention was not surprising, given that it was already coming an escalation of sanctions: in February, in the face of massive cuts and user protests, the entry of observers into the company had been arranged, which had also been fined $1,000 million.
Already on that occasion, from Peronism the debate on re-nationalization had been revived. And in fact the Buenos Aires chief of staff, Martin Insaurraldehad been in charge of a group of mayors from the southern zone to “put together a consortium and offer, within the market rules, to take over the company by paying what it’s worth.” The promise consisted of putting himself “in charge of the investment that is needed to put an end to the laziness of this company.”
Now, with the new crisis, the Government went a step further, with the criminal complaint against the Edesur board of directors, for the charges of abandonment of person, embezzlement and fraud to the detriment of the public administration.
But that move wasn’t enough to calm demand for a stronger political signal. Thus, claims were heard from within the ruling coalition, in the sense of move to nationalization. There were political leaders who anticipated the ENRE audit and the debate in Congress, and demanded that the Government, by decree, immediately revoke the concession to Edesur. It was the case of Teresa Garciaa provincial senator in Buenos Aires, who stated that the conditions were in place for such a measure.
And other proposals were added that do not imply complete nationalization, but rather point to the mixed model. It is the proposal of the piquetero leader -and possible pre-presidential candidate- Juan Grabois: “Edesur and Edenor are somewhere between negligence and boycott. Let’s take the YPF model: 51% public, 49% private with strategic definitions in favor of the people and efficient management controlled by shareholders.”
According to government critics, Edesur’s intervention is a way of avoiding the substantive discussion on the tariff issue
And even the ENRE controller himself, Walter Martellohinted at what could be the formula that is in mind on the part of the Government: “There are experiences that can be taken into account, such as that of Brazil with Eletrobras, where the State has a 45% stake and that allows it a stronger position on the board of directors when it comes to taking investment criteria, from priority assignments and better control”he said in a radio interview.
The official maintained that “politics has to discuss the model for determining energy distribution, especially in the AMBA, towards which model it wants to go.”
The diminishing effect of deflecting blame
However, in contrast to the verbal fireworks of officials, the expectation in the business world is that there will be no important definitions until the government change in December.
And the reason is clear: in addition to not exposing itself to the possibility of lawsuits, keeping the electricity supply in private hands allows the Government continue “outsourcing” to distribution companies the design problems of its energy policy, in which the tariff question is a central part.
“To put it crudely: today these companies are in the business of “putting their faces” for the failure of the Kirchnerist “model” that has prevailed in recent decades,” he says. Diego Dillenbergerexpert in political communication.
In a column published in iProfessional, Dillenberger argues that Kirchnerism will not go to the extreme of expropriating the company because it would be harmful from a political point of view.
“The user receives his invoice from Edesur and Edenor, and the only participation of the State is that of being ‘the good guy’ who puts the seal of ‘tariff subsidized by the national State’. All the blame for the failure of the economic model magically passes to the distributors, and the ‘present State’ only appears helping ‘those who have less’ by giving money to the companies”, the expert points out.
In the same line, Nicholas Gadanoan economist specializing in energy policy, wrote an ironic tweet: “Oh but Edesur”, together with a graph that compares the increase in the price of the Edesur service for the consumer, it has risen around 30% since the Fernández administration began, while inflation borders 340% and the exchange rate 220%
There were also reactions from the political opposition. Like the one of the Deputy Martin Tetazwho wrote on the networks: “The government becomes angry and Edesur intervenes, but Alberto Fernández himself signed decree 815/22 suspending the comprehensive tariff review, which is the instance in which investments are agreed upon and quality is compromised.”
Jorge Ferraresi, former mayor of Avellaneda and former Minister of Housing, will be in charge of state intervention in Edesur
Until now, the Government’s position has been to accuse Edesur of not having made sufficient investments, especially after being benefited from the “tariffazos” of the Macrista management -a period in which it was able to present balance sheets with profits, an unprecedented situation in almost two decades of losses-.
Against the state’s argument, Edesur alleges that US$850 million was invested in the last five years, but that the tariff delay put it at the limit of its possibilities to improve network maintenance. The latest balance presented by Edesur, for the period January-September 2022, showed a loss of $9,712 million, even though electricity sales had increased by 5%, measured in volume.
According to the company, the adjustment that is needed is not small: in the accumulated of the last three years the increase in costs was located at 320% but that the rates barely varied 31.5%.
In the recent hearings to review the rates, the two large electricity companies requested increases of 260% for this year, as a condition for maintaining investments. And Edesur, in its presentation of the flow of funds for 2023 projected a deficit of $103 billion.
It will not be an easy challenge for JFerrarese orgies -former Minister of Territorial Development and Habitat and former mayor of Avellaneda-, who will take the role of controller. Although he will not have power over the operation of the company, he does have power to monitor its investment plan and service provision.
It is a situation that implies an eventual risk for the medium term, especially if the weather continues to cause problems: with a state controller within the company, it will probably not be so easy to divert blame when the next crisis in the electrical system occurs. .
