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    The energy sector is readjusting in Argentina and the world


    November 29, 2022 - CE Noticias Financieras

     

      The announcement of the exit of the Italian ENEL from the country took place in the midst of the debate on the role of the State in Argentina, which opens some opportunities. It is also framed in a world context in which in the energy sector the private sector is moving away to give more space to the public sector in view of the crisis caused by the war in Ukraine. The impact of the war did not have a full impact on the country thanks to fundamental policies that were carried out.

      The high international energy prices hit most of the countries in the world and the electricity generators and distributors. This was the case of the Italian ENEL , which announced that it plans to sell US$ 21,500 million of its assets to reduce its global debt. It plans to carry out most of the divestment plan by the end of 2023 and includes its exit from Argentina and Peru, as well as the sale of assets in Romania and some in Spain. Through a press release, the multinational specified that it will sell all its companies in the country, including Edesur, the Costanera and Dock Sud thermal power plants, the concession of the El Chocón hydroelectric power plant, transmission lines and electricity transmission lines.

      For this reason, the Secretary of Energy, Flavia Royon, pointed out that the sale of Enel's assets "will not affect the population from one day to the next". She clarified that this is because "it will not be an immediate process" and because "the provision of the service will be taken care of" with whoever the acquirer is.

      Edesur's 3,300 km2 concession area covers the southern area of the City of Buenos Aires and 12 districts of the suburban area, where it distributes electricity to about 2.5 million customers. Two years ago, the mayors of these Buenos Aires districts had joined together to complain against the service provided by Enel, which they described as "terrible". They also criticized that, without even verifying the amounts, the former governor María Eugenia Vidal had transferred to them a debt that did not correspond to them. In the popular neighborhoods Edesur refused to make connections, so it sent high amounts of alleged community consumption without support, since it did not place the meters.

      In July 2020, the municipal chief of Esteban Echeverría, Fernando Gray, stated that they had three or four neighborhoods per day without electricity. "We have been claiming for years that we have not had any response or any investment. That is why we ask for the revocation of the concession and that Edesur's service be withdrawn", he said. In the same line, the mayor of Quilmes, Mayra Mendoza, expressed the same opinion: "We have been suffering power cuts since the first day of severe cold. In the middle of the pandemic, when we need to stay at home, this is unsustainable. All the extraordinary profit that Edesur made did not go to investment".

      In the last nine months of this year, Edesur amassed a net profit of $ 5,011 million, which compares to a net profit of $ 27,154 million in 2021, according to the balance sheet submitted to the National Securities Commission and reviewed by El Destape. Specifically, the last three months were positive for the company that operates in the south of the AMBA for $ 654 million, before the impact of the tariff update defined by the Ministry of Economy.

      One of its subsidiaries in charge of the first electric stage, Enel Generación Costanera SA, obtained a net profit of $ 3,230 million so far in 2022, which is also measured against a loss of $ 52 million for the same period of the previous year.

      The balances prior to tariff increases show a more than evident potential behind these companies, which have already had acquisition proposals. But not only private companies can take advantage of this opportunity, but also the State, to take over a service that historically was in its hands until the neoliberal privatization wave. In fact, a proposal was presented in Congress this week for the public sector to take charge of the dams, which are responsible for generating a large part of the electricity.

      In this context, the energy self-sufficiency that Argentina will obtain with the Néstor Kirchner gas pipeline, which will save more than US$ 2,900 million per year between fuel import substitution and subsidy reduction, will not be a minor detail. It will also increase the availability of gas at competitive prices for industry, businesses and households and will generate 10,000 direct jobs.Edesur was formed in 1992 as a result of the privatization of public utilities carried out by Carlos Menem. It is responsible for the distribution of electric energy in the south of the Buenos Aires Metropolitan Area. Enel acquired it from the Spanish Endesa in 2008, together with the rest of its assets. Therefore, it owns the hydroelectric power plant El Chocón, in the provinces of Neuquén and Río Negro, with a concession that expires next year.

      The role of the State

      Because of the energy crisis generated by the war in Ukraine after an increase in demand due to the end of the pandemic, the non-producing countries suffer the consequences. Periodic tariffs and imminent cuts in supplies projected for next winter are on the front pages of their newspapers, particularly in European countries. The European Commission went so far as to push for the creation of taxes on the extraordinary profits of energy companies to limit them and thus counteract "astronomical" electricity bills.

      Faced with such price volatility in the energy markets, many European countries came to the rescue of their companies. Germany raised a new liquidity line of 67 billion euros to help energy companies. Switzerland lent 4.1 billion to Axpo, one of its main energy companies, and Finland lent 2.5 billion to Fortum for its financial problems.

      Austria also had to come to the rescue of one of its main energy companies, Wien Energie. Meanwhile, France announced the nationalization of the electricity giant EDF. Numerous countries are preparing credits to save the sector and not to run out of energy in the winter, which will be harsh and is expected to bring supply problems.

      In Argentina, the opposition intends to take exactly the opposite path to the developed nations. This week, Juntos por el Cambio (Together for Change ) has already revived a classic: its criticism of the companies in the hands of the State. The focus was put on the red that manages Aerolíneas Argentinas, Trenes Argentinos, Correo Argentino and ENARSA.

      The flag carrier managed to reduce the record deficit in 2019, under the Macrismo administration. It managed to reduce it by 2021 to $ 65,796 million, contributed by the National State. Without accounting for the huge economic impact it generates, 50% of these transfers were collected again in taxes and fees.

      "Branch line that stops, branch line that closes" had been the railway policy of the Menemism, which resulted in the disappearance of entire towns and the even greater saturation of large cities due to massive migration. The train modernization plan carried out by the Ministry of Transportation now benefits 280,000 people per month. The Government managed to recover 1,700 kilometers of tracks, 15 stretches of recovered trains and 56 reconnected localities throughout the country.

      Without taking into account that Mauricio Macri never paid his debt with Correo Argentino to the State and tried to self-reimburse it, the current administration acts as a fundamental tool to include in public policies populations far from the cities, in addition to competing with Internet sales platforms. The company carries out the distribution and door-to-door parcel delivery of the main e-commerce platform in the provinces that only Correo Argentino reaches, especially in the north and Patagonia, and has 1,432 branches throughout the country. It operates as the National State's window with more positions in the territory, more than any public agency, so that many of these branches are the only State's window in their places.

      Finally, ENARSA is responsible for the country achieving energy self-sufficiency in 2023 thanks to the Néstor Kirchner gas pipeline. The war in Ukraine showed the importance of energy independence. This will be a reality thanks to YPF 's initiative to explore Vaca Muerta before the rest. Although it is not a state-owned company, the corporation, majority controlled by the Nation, earned $ 92,182 million so far this year, at the same time it increased its production by 9% and its investments by 60%.

      Electricity generation

      Mr. Oscar Parrilli, a senator from Neuquén, presented a bill to manage the continuity of the hydroelectric concessions under national jurisdiction through ENARSA, in partnership with the provinces of Neuquén, Chubut and Río Negro. The initiative was supported by the legislators Silvia Sapag, from Neuquén, Martín Doñate and Silvina García Larraburu from Río Negro, and Carlos Linares from Chubut.

      The legislator proposed that, as from next year, when the hydroelectric concessions of national jurisdiction come to an end; "the administration, operation and exploitation of each of the hydroelectric exploitations duly granted in concession will be assumed by ENERGÍA ARGENTINA SA, without prejudice of the eventual responsibilities for the obligations assumed by the current concessionaires". As an option for each case, the project opens the door to "incorporate the participation of private capital".

      For Parrilli, the "complex international situation" derived from the war in Eastern Europe, "has placed at the center of the public debate the need to accelerate the development of our conventional and non-conventional hydrocarbon resources, in order to guarantee the domestic supply and place growing surpluses in the foreign market, as well as to strengthen the development of alternative sources, such as renewable ones".

      In 2023, the concessions that currently control the operation of the hydroelectric dams in the Patagonian provinces of Neuquén, Río Negro and Chubut will expire. Therefore, Parrilli recalled that "within the framework of the so-called State Reform carried out during the 90's, Law 24.065 was sanctioned" which privatized "the administration, operation and exploitation of the existing hydroelectric exploitations from the public to the private sphere, through 30-year concession contracts, with the exception of binational entities". Contracts that, as of August 2023, begin to expire.

      The legislator from Neuquén stated that "the experience of almost 30 years shows us that private management, by itself, does not necessarily generate greater investment, nor does it guarantee the expansion of the sector. Since the concession of hydroelectric exploitations, a period of decline in the participation of hydropower in the energy matrix began. From 43% of installed power in 1994, it decreased to 25% today".

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