Settlement Restores Contested Energy Company to Salvadoran Government

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El Salvador and the Italian energy company Enel Green Power have reached a settlement following eight years of international litigation in a case that became emblematic of the dangers of public-private partnerships (P3s) and the rampant corruption of previous right-wing administrations in El Salvador. Per the agreement, the government of El Salvador purchased Enel’s shares in the once-public geothermal energy company LaGeo for $280 million, returning it to full state control.

In the late 1990s, the then-governing Nationalist Republican Alliance (ARENA) party opened the public LaGeo company up to private international bidders as part of a wave of privatizations of public services. Enel Green Power was granted a P3 contract to jointly administer LaGeo with the State in 2002, later moving to acquire a majority ownership in the company. But El Salvador refused to relinquish control, and Enel took the case to the International Chamber of Commerce for arbitration, which resolved in favor of the Italian company in 2011. When the government’s appeal of the decision was denied in 2013, El Salvador took the case before a World Bank court in Washington, DC, where the recent settlement was eventually brokered.

As El Salvador continued to fight Enel in international courts in 2013, President Funes pushed the Attorney General to open an investigation into the 2002 contract that allowed for the lucrative public energy company to pass into private foreign hands. That investigation has resulted in criminal charges against nine former ARENA government officials and businessmen, and in the spring of 2014 the Attorney General ordered the assets frozen of all nine individuals as well as those of Enel Green Power in El Salvador, totaling over $2 billion. Officials have affirmed that those proceedings will continue regardless of the deal reached with Enel.

“This is about solving a problem that we are paying for as a consequence of irresponsible attitudes that were taken in the past,” said Governability and Communications Secretary Hato Hasbún of settlement.

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