BUENOS AIRES (Dow Jones)–There is little chance Argentina’s government will allow energy companies like Pampa Energia SA (PAMP.BA) to raise rates before a presidential election in October, the company’s chief executive said Friday.
Pampa is the leading integrated electricity company in Argentina. It generates, transmits and distributes power.
«Negotiations to increase tariffs have mostly stopped,» Chief Executive Ricardo Torres said in a conference call to discuss Pampa’s second-quarter earnings. «But we expect that, post-election, negotiations will begin to move again.»
Torres said he’s confident the government will reform the current rate system because subsidies given to utility companies have risen to 4% of gross domestic product.
«The government is very aware of this and we will work together to find a way out of this situation,» he said.
Pampa’s holdings include Argentina’s leading power distributor, Edenor, and the power transmitter, Transener, among others.
Argentina’s government froze utility rates across the board during its 2002 economic meltdown and currency devaluation. It froze rates partly to protect local consumers from paying disproportionately high prices for things like electricity and natural gas after the devaluation.
But government officials have repeatedly said the low rates help drive economic growth and are necessary to keep Argentine companies competitive in a global economy.
Even so, Torres said the company recently was able to raise power distribution fees in Salta Province by 34% and by 15% in San Luis and northwestern in parts of Buenos Aires Province.
«Overall, this represents around ARS148 million ($35.6 million) of additional revenue per year,» he said. «That will impact Edenor and Pampa revenue in the second half of the year.»
Torres also said he expects Pampa to recover lost expenses related to the delayed installation of a steam turbine at its Loma La Lata generation plant in Neuquen Province. He said the turbine should be online by September.
On Thursday, Pampa posted a net loss of ARS80.8 million ($19.4 million) for the second quarter of 2011, compared with a net profit of ARS87 million a year earlier.
Torres said Pampa’s main challenge is the same one facing other companies in Argentina–inflation.
«The big danger we have is inflation, but it’s not spiraling,» he said. «We think it can be kept under control for the near future.»
-By Taos Turner, Dow Jones Newswires; 5411-4103-6728; taos.turner@dowjones.com
Source: online.wsj.com