El Salvador: LaGeo Case Affecting Country's Image

The dispute between the Italian company Enel and the CEL and INE commissions has sent a negative message to foreign investors.

Monday, August 22, 2011

In the opinion of experts, the fact that by the Ente Nazionale per l'Energia elettrica (Enel) and the Lempa River Hydroelectric Executive (CEL) are going through an arbitration process in order to decide who gets majority control of the geothermal plant, could be affecting the country’s attractiveness in terms of foreign investment.

At a time when the country is attempting to adopt a law on public-private partnerships, the image being projected by these conflicts could threaten the arrival of more investments, believes Bernard Weaver, an international consultant on private-public partnerships and the financial for the World Bank (WB).

An article in laprensagrafica.com explains that "the Enel-CEL case was resolved in July this year at the International Court of Arbitration of the International Chamber of Commerce in Paris, France, on behalf of the company Ente Nazionale per l'Energia elettrica (Enel). It was determined that the company was entitled to inject more capital in order to have a majority stake in LaGeo, as stated in the contract that was signed in 2001.
However, the Executive Hydroelectric Commission of Rio Lempa (CEL) filed a motion to annul the resolution issued by the Paris court after refusing to comply with the order. This process could take a year to resolve. "

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More on this topic

El Salvador Seeks Financing for Geothermal Energy

September 2016

Through the company LaGeo the government has announced that $250 million is needed to start exploration in new areas and to change a geothermal turbine plant in Berlin.

Authorities at the HEPP Executive Commission of the Lempa River (CEL Group) explained that they have made closer ties with institutions such as the World Bank and the CABEI in order to negotiate possible financing. 

Extra Judicial Dialogue Between El Salvador and ENEL

November 2014

At the request of the parties, arbitration and dialogue has been suspended for 30 days in order to reach an agreement over the shareholding structure of the company LaGeo.

From a statement issued by the Government of El Salvador:

Talks to find solutions to disputes between the State of El Salvador and the Italian company ENEL Green Power, over the ownership structure of the company LAGEO SA, de CV, started today in Washington, DC, with a meeting taking place on the premises of the International Centre for Settlement of Investment Disputes (ICSID), which is the forum for arbitration and conciliation of the World Bank Group.

El Salvador To Appeal LaGeo Ruling

July 2011

CEL has filed a motion to quash the ruling that would allow Enel to have a majority stake in LaGeo geothermal plant.

Tóchez Irving, president of the Commission of the Lempa River Hydroelectric Executive, said: "It is inappropriate to put a country’s strategic resource, such as a geothermal plant, into private hands," when presenting the proceedings before the court of appeals in Paris, France.

Enel sues Salvadoran Government for $120 million

October 2008

The case was presented before an international tribunal in France, which the parties had established to settle conflicts that might arise in the preparation of the LaGeo.

Italian company, Enel, which partnered with the Salvadoran government in the operation of the LaGeo geothermic electric generating plant, took the government to court internationally for $120 million for not allowing it to hold the majority of shares that corresponds to the investments carried out, based on the contract between the two parties.