Argentina announces expropriation of Repsol oil subsidiary YPF
After weeks of speculation, Argentinean President Cristina Fernández de Kirchner announced on Monday that her government is going to nationalize the Spanish Repsol subsidiary YPF, declaring that her country’s hydrocarbon industry was a sector of “public interest.”
In a speech made in Buenos Aires after returning from the Americas Summit in Colombia, Fernández de Kirchner explained that she will send a law to Congress that proposed giving 51 percent control of YPF to the federal government and the remaining 49 percent to the country’s provinces.
In the coming days, the country’s appraisers will decide how much it will reimburse YPF for its shares.
“When one makes decisions in the interests of national management […] one also expects that managers understand the interests of the state,” Fernández de Kirchner said.
“We are the only country in America and one of the few in the world that doesn’t manage its own natural resources, but there were stronger arguments in favor of us taking this decision,” she said.
The nationalization came just days after Spain issued a stern warning against the Argentinean government not to take control of YPF, threatening to break “economic and fraternal” relations if the leftist Peronist administration of Fernández de Kirchner followed through with the plans.
In Madrid, María Dolores de Cospedal, secretary general of the ruling Popular Party (PP), said the government intends “to give an energetic response” after consulting with its European Union partners.
An EU delegation from Brussels was scheduled to arrive in Buenos Aires on Thursday to demand that Argentina respect the agreements it has signed with foreign investors.
Spanish multinational corporation Repsol purchased 98% YPF in 1999 in two stages: a 15% share sold by the national government for US$2 billion, and a further 83% for over US$13 billion including all remaining public sector shares (10%, equally divided between the nation and the provinces) as well most of the outstanding investor shares. The union of the two companies took on the name Repsol YPF; YPF would represent 40% of the new firm's reserves and over 50% of its production.
The Petersen Group (property of the Eskenazi family of Buenos Aires) entered into a partnership with Repsol in 2007 by acquiring a 15% stake in YPF; the group bought another 10% of the company for US$1.3 billion on 4 May 2011. A majority of the firm's shares (58%) remained under the control of Repsol, while 16% remained in private portfolios; the Argentine Government retained the golden share.
Production and reserves declined and the nation's energy trade balance recorded a loss of US$3 billion in 2011, the first since 1987. President Cristina Fernández de Kirchner raised YPF frequently in speeches during March 2012, referring to underinvestment and excessive dividends at the firm as the cause for output declines.Governors in six fossil fuel producing provinces subsequently revoked YPF leases representing a fifth of its oil production.
Citing Brazilian oil giant Petrobras as an example, the president ultimately announced the introduction of a bill on 16 April for the partial renationalisation of YPF, whereby the state would purchase a 51% share; the national government would, in turn, control 51% of this package, and the provincial governments 49%. Planning Minister Julio de Vido was appointed to head the Federal intervention, replacing CEO Sebastián Eskenazi. Repsol YPF CEO Antonio Brufau, Spanish Prime Minister Mariano Rajoy and other Spanish officials expressed objections to the nationalisation, accusing the Argentine government of driving down YPF shares ahead of the announcement (its stock quote declined by over half from February to April). Responses included a diplomatic offensive by Rajoy in other countries in the region;assurances by Industry Minister José Manuel Soria of "clear and decisive" Spanish government measures; Foreign Minister José García-Margallo y Marfil's admonishment that Argentina had "shot itself in the foot" by damaging relations with Spain (adding that such a move would make Argentina a "pariah") and other threats.] The Chinese state oil concern,Sinopec, was reported to have been in talks to buy out Repsol's share in YPF - a potential deal scuttled by the Argentine announcement. Repsol shares fell by 9%.
Argentine Economy Vice-Minister Axel Kiciloff rejected initial Repsol demands for payment of US$10.5 billion for a controlling stake in YPF, citing debts of nearly US$9 billion;] the firm's book value at the end of 2011 was US$4.4 billion, and its total market capitalization US$10.4 billion on the day of the announcement.