Sparks fly: Argentina offers to pay energy companies in bonds

Analysts say the bond proposal would mask expenditures that all but wipe out the Milei administration’s lauded fiscal surplus

The government has presented energy companies with a proposal to pay transactions made in December 2023 and January 2024 with BOPREAL bonds worth around US$600 million in nominal terms.

Economy Minister Luis Caputo held a meeting with power and gas companies in the treasury on Thursday to inform them of the proposal. The administration also told companies that cash flows for transactions from February onwards are returning to normal. 

Energy companies have been mired in a dispute with the government over a debt of more than US$2 billion. Thursday’s offer would only cover transactions that took place since the La Libertad Avanza government took office.

During the meeting, Caputo noted that President Javier Milei’s government used funds from the 2024 financial year to make payments to grid operator CAMMESA that were due in October and November 2023, during the Alberto Fernández administration.

Among those attending the meeting were representatives from major energy companies including YPF, Tecpetrol, Pampa Energía, and Tecpetrol, as well as energy secretary Eduardo Rodríguez Chirillo.

High tensions

The government has previously maintained that it is not liable for debts taken on by the previous administration. It argues that increases to energy tariffs should serve to compensate for payments the treasury has left on stand-by. 

A significant proportion of the fiscal surplus lauded by the Economy Ministry is due to cuts to energy subsidies and payments to Cammesa. According to the Center for Argentine Political Economy, of every AR$100 cut in March, 37 were cuts to pensions, making this the main adjustment to real-terms spending. Second came capital expenditures (accounting for 26%). Subsidies accounted for 5%, mostly energy subsidies in the form of transfers cut to Cammesa. This triggered higher power, gas and transport tariffs. 

In March, energy subsidies came to AR$308.9 billion pesos (US$345.5 million at the official rate, US$299 million at the MEP rate), down 17% year-on-year in real terms.

“The government has a reasonable objective of fiscal balance, but things have to be paid for,” said Nicolás Gadano, an economist and former general manager at Argentina’s Central Bank. “Payments to energy producers are late. If Cammesa were paid what it’s owed, the fiscal surplus would virtually disappear. The government could pay with abbond, which hides the expenditure,” he told radio station Splendid. 

When the government caps energy tariffs, he explains, power companies Edesur and Edenor do not pay Cammesa, and late payments ripple through the whole supply chain.

Originally published in Á and Ámbito Energy Report. Translated by Amy Booth


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