Metrogas to File for Bankruptcy

Argentina’s Metrogas says it is seeking bankruptcy protection after an 11-year government rate freeze hurt company’s finances. Metrogas says the rates it is allowed to charge have not increased in the past 11 years, but during that time operating costs have more than tripled. The company had been hoping a tariff increase announced in 2008 would allow it to improve liquidity and boost the debt profile. Metrogas has $250m in debt, according to Moody’s, which lowered the rating to Ca and withdrew coverage on the bankruptcy plan. The gas utility 70% owned by a BG and Repsol YPF consortium faces high refinancing risks in 2010 and 2011, when maturities will reach $21m and $42m, respectively, Moody’s says. “The government has taken an uncompromising and oftentimes hostile stance towards the regulated utilities and has blatantly refused to update utility tariffs in line with the observed increase in production costs,” Goldman Sachs says in a report. “For instance, electricity and natural gas prices have to a great extent been frozen since the 2001-02 financial crisis. This has affected the profitability and cashflow position of the utilities sector which jointly with a private sector unfriendly government stance is generating low levels of investment observed in these critical sectors,” it adds.