UPDATE 2-Bolivia nationalizes four power companies

* Bolivia now controls 80 pct of power generation – Morales

* Morales says Bolivia must compensate investors for assets
(Adds Rurelec, GDF Suez comments, background)

By Diego Ore and Eduardo Garcia

LA PAZ, May 1 (BestGrowthStock) – Leftist Bolivian President Evo
Morales said on Saturday he had nationalized four power
companies, including a subsidiary of France’s GDF Suez, in his
drive to tighten state control over the impoverished economy.

Morales, a close ally of Venezuela’s Hugo Chavez,
nationalized Bolivia’s key natural gas industry soon after
taking office in 2006 and has since taken control of several
utility companies as well as the Andean nation’s biggest
smelter and top telecommunications firm.

“We’re here … to nationalize all the hydroelectric plants
that were owned by the state before, to comply with the new
constitution of the Bolivian state. Basic services cannot be a
private business. We’re recovering the energy, the light, for
all Bolivians,” he said in the central Cochabamba region.

Morales said the state now controls 80 percent of
electricity generation in Bolivia and was aiming for complete
government control over the sector.

The decree read aloud by presidential spokesman Ivan
Canelas said the state was taking control of the stakes that
private investors held in four power companies, including
Corani, Guaracachi and Valle Hermoso, the country’s biggest
generating companies.

They emerged in the 1990s following the privatization of
the state National Electricity Company (ENDE) and account for
about half of Bolivia’s electricity market.

Corani is 50 percent owned by Inversiones Econergy Bolivia
S.A., a subsidiary of France’s GDF Suez (GDFZY.PK: ) (GSZ.PA: ).

Guaracachi is 50 percent owned by Britain’s Rurelec PLC
(RUR.L: ), while Valle Hermoso is run by a private Bolivian firm
called the Bolivian Generating Group.

In Corani, Guaracachi and Valle Hermoso, half the shares
were held by private investors with the rest held by the
Bolivian state.

The fourth power company nationalized on Saturday was
ELFEC, which supplies the central Cochabamba region and is
controlled by workers and Bolivian investors.

BOLIVIA AT ODDS WITH INVESTORS

Morales said the Bolivian government tried, but failed, to
convince investors to sell the shares the state needed to have
a controlling stake.

“It’s the state’s obligation to compensate investors for
their assets. … We made an effort to reach an agreement with
the private, multinational companies, but they were unwilling
to reach an accord,” said Morales.

Rurelec said it was “very disappointed” Morales had decided
to nationalize its assets in Bolivia.

“We’re disappointed because Rurelec is third largest
British investor in Bolivia. And since 2006, when Evo became
president, we have invested more than $110 million in new power
plant capacity,” said Rurelec CEO Peter Earl. [ID:nLDE64008E]

A GDF Suez spokesperson said in Paris the company “always
respects the legislation of the country where it is active
while defending its interests as a company.”

Several companies have launched legal action over the
compensation they were offered as part of Morales’
nationalization drive.

Argentina-based Pan American Energy recently filed a
complaint against Bolivia at a World Bank arbitration tribunal,
regarding the nationalization of its Bolivian subsidiary in
early 2009. [ID: nN27121450].

Morales likes to celebrate May 1, known as May Day or
International Workers’ Day, by nationalizing companies
controlled by foreign investors.

On May Day last year, he nationalized Air BP, a division of
British oil major BP Group (BP.L: ) and the same day in 2008 he
took over Entel, the country’s largest telecommunications
company, until then controlled by Euro Telecom International, a
unit of Telecom Italia (TLIT.MI: ).

Morales, the country’s first indigenous president and a
self-declared anti-capitalist, took office for a second term in
January pledging to diversify the economy from its dependence
on natural gas and mining exports and to launch state-run
paper, cement, iron and lithium companies.

His efforts to give the state more control over the economy
are very popular with Bolivia’s indigenous majority, who say
foreign companies have ransacked the country’s natural
resources and invested little to help the poor.

Critics say Morales, 50, has scared away crucial foreign
investment with nationalizations of companies and is not acting
on behalf of all Bolivians but primarily for Aymara and Quechua
Indians and other indigenous groups.

Stock Today

(With reporting by Sudip Kar-Gupta in Paris; editing by Simon
Gardner and Todd Eastham)

UPDATE 2-Bolivia nationalizes four power companies