Saturday, February 10, 2007

Take What You Can Get and Go

In the spring of 2000, Dennis W. Bakke meets with recently elected Venezuelan President Hugo Chavez whom he finds to be a “charming conversationalist”. Chavez smiles and assures Bakke his government will support the acquisition of Venezuela’s largest electric utility by AES Corporation, and the deal goes through. Seven years later Chavez again smiles as the deal goes bad.

The AES Corporation (NYSE:AES) and the Bolivarian Republic of Venezuela today signed a memorandum of understanding (MOU) for the purchase of AES's 82.14% stake in La Electricidad de Caracas (EDC) for US$739,260,000, post the usual yearly annual dividend to be paid in 2007. … The MOU is in effect through March 31, 2007.

Taking What You Can Get: AES will receive $739.3 million for its 82.1% interest in La Electricidad de Caracas (EDC) and it’s a bad lesson in taking what you can get. AES paid $1.7 billion for its stake in 2000, a year after President Hugo Chavez came to power and in the following years, AES has dumped another $600 million into capital improvements.

Just to illustrate that 21st Century socialism has a kind heart, Chavez is fully willing to return 32 cents for every dollar invested with his blessing by the Yankee capitalists. With an electoral mandate and rule by decree powers, this latest experiment with eliminating private ownership of the means of production is all systems go.

On a more local note, the South Central Federation of Labor announces their support for the municipalization Madison Gas & Electric (NASDAQ: MGEE) and will only endorse candidates willing to pursue this deprivatization agenda. The glorious dream of government ownership is alive and activist in both Caracas and Capital City.