Power Producers Seek Better Terms for $2 Billion Argentina Debt

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(Bloomberg) — Argentina’s privately-run power producers will reject an offer by the government to settle a debt that’s mushroomed to about $2 billion, Pampa Energia SA Chief Executive Officer Gustavo Mariani said.

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The producers — led by Pampa and Central Puerto SA, which together supply about 30% of Argentina’s energy — want better terms for the debt, which began to accumulate late last year when President Javier Milei’s government stopped paying them as part of a broader effort to shrink its budget deficit.

Most of the current offer by the government, published Wednesday in the federal register, is comprised of a sovereign bond in hard currency maturing in 2038. The bond is trading at about 50 cents on the dollar, so Milei is essentially asking companies to take just half of the money due.

In the period from December to February alone, Pampa says it’s owed $163 million by state power wholesaler Cammesa, some of which it’s already written off. The government covers a chunk of the cost of power generation for Argentine residents and industry, and channels those subsidies to producers through Cammesa.

Milei is working to slash the energy subsidy bill, but must tread carefully to avoid social unrest.

While Mariani said he’s optimistic a deal can be reached, he insisted that — for Pampa at least — there’s one issue they won’t budge on: The government can’t rack up any more debt.

“Crucial to this negotiation is that going forward we have the visibility that payments will begin to be current and on time,” Mariani said Wednesday on an earnings call. “So that the stock of debt is limited and will not continue increasing.”

For Maria Moyano Hidalgo, a senior corporate debt analyst at Adcap Capital Securities in Buenos Aires, the chief risk for Argentina’s power producers isn’t so much the initial hit to their balance sheets, but how a bad deal would impact investor perceptions in the long term. “Breaking the contracts would be a really bad signal,” she said.

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