Portuguese shareholders say viability of Cape Verde’s Electra is at stake

22 June 2006

Praia, Cape Verde, 22 June – Portugal’s EDP and Águas de Portugal, the Portuguese shareholders of Cape Verdean power company Electra, have said that the financial viability of the company is at stake, due to increased production costs, particularly for fuel.

In a statement issued in Praia, shareholders EDP/AdP, who have a 51 percent stake in the Cape Vedrean producer and distributor of power and water, said that the recent fuel price hikes and the eradication of the diesel subsidy decided by the government, had increased production prices by 75 percent.

This rise, which has not been supported by water and electricity tariffs, “has merely served to worsen the company’s difficult situation,” the companies said, for which reason, “the current context in which the company is operating, is significantly distanced from the conditions of the concession contract.”

Therefore they recommend that a wide-ranging study be carried out by an independent body to be chosen with the State in order to “determine the necessary internal and external measures required to make the company viable.”

At the beginning of the month, Cape Verde’s economic regulation agency (ARE) increased the price of electricity by 25.4 percent and water by 13.3 percent.

The increase was decided at a time when the Cape Verdean government, which controls 34 percent of the company, has been demanding that Electra invest in distribution and production, saying that these investments were a condition of the tender document drawn up for the company’s privatization in 1999.

Private investors have said that financial conditions are not currently appropriate for these investments, given the currently low tariffs. (macauhub)