EMP forced to sell Bolivian energy investment

The emerging markets-focussed private equity firm has sold 10 percent stake in pipeline company Transredes at a profit for for $46.6m, in compliance with Bolivia’s nationalisation of the oil and gas sector.

EMP Global’s AIG-GE Capital Latin America Infrastucture Fund (LAIF) was forced by the Bolivian government to fully divest itself of its 9.7 percent shareholding in Bolivian natural gas transportation company Transredes.

Government-owned energy company Yacimientos Petroliferos Fiscales Bolivianos (YPFB) purchased the stake for  $46.6 million (€29.6 million). Prior to the divesture, LAIF was the third largest private shareholder in the company.

“[LAIF] exited at a profit which was a very good outcome for investors given the current political and macroeconomic circumstances in the country,” said a source familiar with the transaction.

LAIF made its original investment in Transredes in 2000, at which time the company had a market capitalisation of roughly $483 million. Transredes was created as the result of the 1996 privatisation of YPFB. The company owns approximately 6,000 km (3728 mi) of gas and liquid pipelines.

The 2006 Nationalisation Supreme Decree, issued by Bolivian President Evo Morales, required that renationalised YPFB assume control of all Bolivian oil and gas companies. Under the decree, YPFB was mandated to acquire at least 50 percent plus one share of Transredes by 1 May 2008.

As of 5 May, YPFB had acquired 47.4 percent ownership of Transredes. TR Holdings, a 50-50 joint venture between energy companies Shell and Ashmore Energy International, owns 50 percent of Transredes. The remaining shares are largely held by individuals.

EMP Latin American Management, a joint venture between EMP Global and four members of EMP Global’s Latin American team, is the principal advisor to LAIF. The fully invested fund closed on $1 billion in 1996 and targets equity investments in South America, Mexico, Central America and the Caribbean. Its sponsors are American International Group and GE Capital Corporation, whose combined investments comprise 30 percent of its capital.

EMP managed the day-to-day operations of the fund during its investment period. Decisions regarding divesture are made by AIG and GE with EMP serving as advisor.

Washington, DC-based EMP Global is an international private equity firm with twelve funds totaling close to $6 billion in capital commitments. The firm’s core competence is in emerging markets infrastructure.