Conflict between Portuguese Electra shareholders and Cape Verde government intensifies

13 July 2006

Lisbon, Portugal, 13 July – The conflict between the Portuguese shareholders of Electra, EDP and Águas de Portugal, and the Cape Verdean government, about power cuts on the archipelago intensified this week, with threats to pull out of the agreement between the two parties, the Portuguese press reported.

In Lisbon, Diário Económico reported Wednesday that EDP and AdP want to sell their 51 percent stake in Electra, giving up on the fijnancial recovery of the power and water company, which is 34-percent owned by the Cape Verdean government.

The paper said that the company’s accumulated losses, between 2000 and 2005, totaled 35 million euros.

The issue had already been discussed by the chairmen of the two companies, António Mexia (EDP) and Pedro Serra (AdP), with the Portuguese government, as it involves the economic diplomacy plan developed by Portugal.

The last case scenario, the paper said, would be for the issue to be dealt with directly by the Portuguese Prime Minister, José Sócrates, and Cape Verdean Prime Minister, José Maria das Neves.

At the end of June, EDP and AdP said that the financial viability of Electra was at stake due to increased production costs, which were not compensated for by recent tariff rises.

On Wednesday the Cape Verdean government issued a statement saying that the “energy crisis” was “clearly due to the concession-holder’s capacity to ensure sufficient supply, in accordance with citizens’ requirements.”

It added that “as well as the frequent power and water cuts and the consequent losses suffered to citizens and the economy, on June 28 of this year, Electra, in a letter written to the Economic Regulation Agency (ARE), said that, due to a lack of credit with oil companies, will lead to reduced voltage and limited production.”

In order to prevent this situation, the government said that it would urgently approve legislation to encourage increased production capacity, namely conceding tax incentives to independent producers.

The Minister of the Economy, Growth and Competitiveness, João Pereira Silva, said meanwhile that an inspection team had been sent to Electra, and was expected to present its conclusions on the company’s status in the next few days.

The Mayor of Praia had already called for the contract with the Portuguese shareholders to be rescinded. (macauhub)