IDB assistance depends on govt's sector strategy

The Inter-American Development Bank (IDB) will study proposals for new power sector regulations in the Dominican Republic before it offers technical assistance to help the government buy two distributors from Spain's Union Fenosa, the Dominican Republic's IDB representative Moises Pineda told BNamericas. "We have received a verbal request to help [the government] with technical assistance, and we have asked them to give us an official vision of the electric sector so that we can give them an answer," Pineda said. Union Fenosa agreed last week to sell its 50% stakes in distributors Edesur and Edenorte back to the government in a 384mn euro deal that takes effect September 30. The Spanish company will take a 160mn euro loss on the deal, but is glad to be rid of the distributors, which have been hit by high fuel prices, the depreciation of the Dominican peso against the US dollar, and late payments from customers. The country has enough generation to meet its demand, but the main problem is the transmission and distribution of energy in the north of the country, Pineda said. The Union Fenosa deal came just in time, Pineda said, adding that the government had "reached a point of no return, where there was a financial deterioration of the companies due to the economic and exchange rate crisis in the country, which made the relationship between the government and private companies very difficult." The country's privatization experiment in the electric sector is not completely dead, but it needs a major overhaul, he said. "Since they haven't been able to make this system work, a second revision of the model is needed by all the participants in the system to see the lessons that can be learned from the first stage," Pineda said. The government is considering holding on to the distributors and integrating them vertically with state power company CDEEE, or privatizing them again, Pineda said. If the government decides to keep the distributors, it may approach the IDB or World Bank for financing, but before the IDB considers loaning CDEEE money to help restructure the sector, it wants Fenosa to repay the remaining US$150mn of a US$180mn loan corresponding to Edesur and Edenorte, Pineda said.