The Centro Internacional de Arreglo de Diferencias Relativas a inversiones (CIADI) has made a landmark ruling, favoring the Spanish energy firm Enagás and condemning Peru to pay $194 million, approximately €186 million, for its investment related to the Gasoducto del Sur Peruano (GSP). This decision, delivered to Enagás and disclosed to the Comisión Nacional del Mercado de Valores (CNMV), encapsulates over seven years of legal disputes following Peru's revocation of the gas pipeline concession.
The tribunal found the Republic of Peru at fault for breaching the terms outlined under the Agreement for the Promotion and Reciprocal Protection of Investments (APPRI) between Peru and Spain. Specifically, the damages include $176 million awarded to Enagás, which will accrue interest at 1.44% annually, compounded biennially from January 24, 2018, until the compensation is paid. This brings the total to $194 million, alongside covering 75% of the procedural costs associated with the arbitration.
Significantly, the CIADI also highlighted violations pertaining to Peru’s Law 30737, which kept Enagás from repatriation of dividends from its subsidiary, Transportadora de Gas del Perú (TGP). This aspect is key, as it adds pressure on the Peruvian government, already grappling with the implications of its earlier actions, particularly the suspension of the GSP project due to corruption scandals linked to Odebrecht.
The complexity of this situation dates back to January 23, 2017, when the Peruvian government rescinded the concession of the gas pipeline project, which was part of a larger consortium including Odebrecht and Graña y Montero. The GSP had involved an investment exceeding $7.3 billion, with Enagás holding a 25% stake. Following the government’s decision, Enagás sought arbitration to reclaim its lost investment, initially claiming $505 million for both lost investment and associated credit recovery.
While the CIADI’s ruling acknowledged the validity of Enagás's claims and settled considerably less than the amount initially claimed, the news is perceived as positive for the company. Analysts point out the ruling eliminates uncertainty and provides Enagás with leverage for future negotiations, even though the awarded amount constitutes accounting loss.
The $194 million recognized within the CIADI ruling is significantly less than the $505 million recorded on Enagás's balance sheet. This discrepancy will affect their financial statements, with the impact expected to be reflected during the company's annual accounts for 2024. Enagás has confirmed its intention to analyze the ruling closely before finalizing its next steps, which may include seeking amendments or clarifications on the compensation amount.
Despite the financial blow, Enagás remains committed to its dividend policy and future investment plans, including renewable hydrogen infrastructures outlined within the European Union’s PCI list, which are integral to the project’s decarbonization goals. This commitment reflects the company’s strategic focus on maintaining stability and facilitating investments aligned with broader energy transition efforts.
Enagás’s management has expressed willingness to negotiate amicably with Peruvian authorities to facilitate payment of the CIADI ruling. This proactive stance is intended to open the possibility of resolving other outstanding issues, including the inability to repatriate dividends from TGP, which has remained blocked due to current legislations.
Looking at the market response, Enagás has experienced volatility reflecting broader concerns around profitability and operational challenges projected moving forward. With market analysts maintaining their recommendation of “Hold” on the company's stock, the prevailing sentiment underlines cautious optimism. Current stock movements suggest fluctuations, as shares are negatively affected by news of accounting losses reflective of the CIADI ruling, with stock prices around €11.77, down nearly 15% year-to-date.
Market experts remain hopeful for recovery, with some projecting the average target price to be around €15.8, representing a notable potential upside. This ruling, alongside the company’s strategic positioning for negotiation, could fortify Enagás’s market posture, allowing for greater flexibility and adaptability as they navigate complex investment landscapes.
Analyzing the overall impact, this recent CIADI ruling against Peru not only signifies a victory for Enagás but sets the stage for pivotal discussions surrounding future investments and governmental collaborations. With Peru battling legislative challenges and corruption fallout, the need for renewed trust and cooperation between the state and foreign investors is more evident than ever.
