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What is Ashmore Energy International’s end-game? (Part I)

June 17, 2007

One of the most perplexing newcomers to South America’s gas and power markets is Ashmore Energy International (AEI), which is controlled by funds managed by UK’s Ashmore Investment Management.

In May, AEI announced the purchase of Shell’s assets in Bolivia and in Cuiabá, Brazil. Prior to that acquisition, the company announced in February that it had acquired in a swap deal with Suez Energy International 100% of Caliddá of Peru, the Lima and Callao gas distributor. In January it had raised its interest in Colombian gas distributor Promigas to 52.88% from 42.98%.

AEI’s entry in to South America was helped in September by the purchase of Prisma Energy, a subsidiary controlled by bankrupted and disgraced Enron.

But that’s not all. On June 1 it had reached an agreement with GasAtacama, the northern Chile gas transporter and power generator, to purchase for $80 million CMS Energy’s 50% interest in the Chilean side of the 941km pipeline from Argentina and 50% of its interest in the Atacama combined cycle gas turbine (CCGT) plant at the port of Mejillones.

The agreement between AEI and CMS Energy is still subject to approval by Endesa, which controls 50% of GasAtacama. Endesa is expected to announce its decision on the matter by the end of June.

What does AEI know that others don’t?

In Bolivia, where it purchased Shell’s assets in companies like transporter Transredes, is presently going through a messy nationalization program that is dimming the lights for energy majors in the landlocked country. Some companies would ditch Bolivia if they could find a buyer like Shell did.

Chile is suffering from an energy crisis due to cutbacks in gas imports from Argentina. While $97 million is a drop in the bucket compared with the hundreds of millions that were invested in GasAtacama, there appears to be little future in gas-powered generation in northern Chile due to Argentina’s supply woes.

So what in the heck does AEI see that other’s don’t? Some analysts are scratching their heads big time on this one.

See Part II posted June 19

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