Union Fenosa to Divest 16% Stake in Nicaraguan Subsidiary

Spanish utility Union Fenosa is planning to divest its 16% stake in its Nicaraguan subsidiary to the Nicaraguan government, in return for nullifying the company’s $10 million debt owed to the government, reported Reuters.

The news source noted a senior company source as saying that, according to an informal agreement, the deal will take place before April 30, 2008. Union Fenosa reportedly holds a virtual monopoly over Nicaragua’s electricity distribution market.

The country is facing major electricity shortages, with the government blaming Union Fenosa for the blackouts. Unlike the trend in socialist governments in Latin America, Nicaragua has not yet nationalized the electricity sector.

Union Fenosa was earlier authorized by the Nicaraguan government to increase its electricity tariffs by 9.06%, to counter the increasing costs of fuel.