US power group sparks bidding war in Chile

In a move that is likely to spark a bidding war, the US power plant group, AES, made a $1.06 billion, stock and cash, offer for a 75-per-cent stake in Gener, Chile's second-largest electricity producer.

The move, which comes in the wake of a $800-million joint venture agreement between the Chilean group and TotalFinaElf of France, surprised investors. According to industry sources, this is likely to spur TotalFina to improve its offer or bring a third bidder into the picture.

Early last month, TotalFina agreed in principle to take a 20-per-cent stake in Gener, by issuing $360 million worth of new equity. Further, with a view to working together on expansion in Latin America, TotalFina also agreed to buy 80 per cent of the company's Argentine assets for a further $450 million.

The AES offer was welcomed by Copec, the Chilean resources conglomerate which controls 20 per cent of Gener. Copec saw AES as a white knight, and had earlier come out against TotalFina's offer.

Copec had argued that the French offer would force Gener to take a substantial book loss on its Argentine assets, which account for more than half of its estimated $800 million in generating operations outside of Chile. Gener also wholly owns Chivor, the Colombian hydro-electric generator with 1,000MW of installed capacity, and has interests in the Dominican Republic.

The deal, if it goes through, would require a change to the company statutes, which prohibit any one shareholder from owning more than 20 per cent of the equity.