Enagás: ICSID agrees with Enagás in dispute with Peru over GSP and recognises compensation of €186 million
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The Corner | 23 December 2024
Enagás: ICSID agrees with Enagás in dispute with Peru over GSP and recognises compensation of €186 million
Bankinter | The International Centre for Settlement of Investment Disputes (ICSID) has ruled in favour of Enagás in its litigation against Peru and has ordered the South American country to pay Enagás $194m (€186m) for the proceedings initiated in relation to the Gasoducto Sur Peruano (GSP) project. Enagás filed for arbitration to recover its investment in the GSP after the Peruvian government terminated the gas pipeline concession on 23 January 2017 to a consortium in which Enagás participated (25%) together with Brazilian construction company Odebrecht (50%), and Graña y Montero (25%), due to corruption scandals involving Odebrecht. GSP was the concessionary company for the construction of the gas pipeline with an investment of $7,328 million. Enagás claimed more than $500m, a figure that corresponded to both the recovery of the financial investment and the credit rights associated with the recovery of the guarantees executed as a result of the termination of the concession contract at GSP. This award would imply an accounting loss for Enagás of $311m (€298m) corresponding to the difference between the amount recognised in the award ($194m) and the account receivable ($505m) relating to the investment in GSP recorded on the balance sheet. The ICSID also considers that the inclusion of Enagás in category 2 of Law 30737, which prevents the Company from repatriating dividends from its investee Transportadora de Gas del Perú (TGP), constitutes a violation of the Spain-Peru Agreement for the Promotion and Reciprocal Protection of Investments.
Enagás has stated that its legal advisors are analysing the award in detail and that it reserves the right to request a rectification or clarification of the quantification of the amount recognised. Furthermore, Enagás has expressed to the Peruvian authorities its willingness to reach an amicable agreement that would allow the enforcement of this award in a manner that is in the best interest of both parties.
Opinion of the Bankinter team: Favourable news for Enagás, although the amount is lower than initially claimed and represents an accounting loss. The reasons: (i) The award is resolved in its favour and a source of uncertainty is eliminated; (ii) Despite the loss, the amount recognised in the ruling is in line with what the market assumed and with what the company expected to recover in the short term. In our valuation we assumed €125m. In its financial projections, Enagás expected to recover €236m before the end of 2030, leaving the rest for later, (iii) The ICSID also recognises that the impossibility of repatriating TGP’s dividends (€460m) constitutes a violation of trade agreements between Peru and Spain. A period of negotiation is now open between Enagás and Peru on these two open fronts (GSP and TGP) and Enagás’ negotiating position is very favourable following this ruling by the ICSID.