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Enron Mail |
I received an unofficial copy of the vote yesterday from CADE (the official
version has not yet been published) for the Atos de Concentrac?o. Today we received the final deliberation printed in the Diario Oficial concerning the Medida Preventiva. Below is a re-cap of the highlights of the two CADE cases recently decided in favor of CEG AND CEG RIO: Administrative Process (Medida Preventiva) for CEG RIO This is the process in which several industrials brought a charge of abusive pricing against CEG RIO and in which an administrative injunction was imposed by the SDE to maintain CEG RIO's margin at the level existing at time of privatization. Vote was unanimous in our favor to permanently cease the injunction with the Relator of the process reiterating: - the tariff system set out in the Concession Contracts differentiating consumers by segment attends the requirements of an efficient regulatory system and promotes social well-being - the opening and full functioning of commercialization in the gas market depends on the presence of various participants (in the upstream) and in the development of (multiple) production sources and sophisticated logistics - the adaptation of the Concession Contracts (renegotiation) concerning commercialization depends on measures taken by the Conceding Power (the State of Rio) at the appropriate phase of development of the market - CEG RIO's pricing practices fall within the regulatory framework requirements and therefore cannot be considered abusive conduct as they were in strict accordance with the regulations which emanated from competent organs and legitimate policy decisions Appropriate actions (both legal and administrative) are now being taken to collect the differences in tariff due pursuant to the above decision Atos de Concentra??o for CEG and CEG RIO This is the CADE review and approval process for mergers and acquisitions which meet specific threshold requirements. The SDE and CADE were using these initial privatizations as a forum to restructure the gas distribution industry. The threat that existed was imposition of various requirements that included breaking of exclusivity rights, structure for physical and commercial bypass, legal and accounting separation of distribution and commercialization, etc. Such requirements, if imposed by the CADE would have resulted in onerous changes to basic provisions in the Concession Contract. Based on a strong legal and technical strategy and lobby both at the federal and state levels, we achieved a unanimous decision in our favor (CEG and CEG RIO) concluding: - The State has the jurisdiction and autonomy to define privatization modelling and regulatory framework - The recommendations of the SDE may be implemented by the State or its regulatory body when it considers the market ripe for such changes - In the mid-term, after the term of exclusivity set out in the Concession Contracts has expired, the regulatory body should turn its attention to establishing clear rules for the distribution company to allow access to its system - CADE will be sending recommendations to the Brazilian Association of Regulators (ABAR) to study and prepare accounting plans for the country's distribution companies which separates distribution and commercialization from an accounting standpoint only (no legal separation recommended) - CADE will be sending recommendations to ABAR, CNPE and ANP to establish participation limits for the distribution companies in regional markets with a view to prevent excess horizontal control of distribution and commercialization Conclusion: The decision met our objective of clearly establishing that the granting State, not the CADE has the competence and jurisdiction to review the Concession Contracts. It reinforces the concept of the emerging market in Brazil and the need for short term exclusivity in order to develop needed infrastructure. Additional note regarding the final CADE recommendation, it is my opinion that any cross-ownership restrictions would have to emanate from the promulgation of federal and state legislation (the former in cases impacting transportation, the latter in cases impacting distribution), and not from the organs indicated by CADE. Please advise if you would like further details. Regards, Vicky Randy Young 02/21/2001 08:28 PM To: Orlando Puppin/SA/Enron@Enron, Vicky Martinez/SA/Enron@Enron, John Novak/SA/Enron@Enron cc: Rob Walls/ENRON@enronXgate Subject: Re: CADE - CEG/CEG-RIO Great job. I look forward to the update. ry Orlando Puppin 02/21/2001 03:44 PM To: Peter E Weidler/NA/Enron@Enron, Ricky Waddell/Enron Communications@Enron Communications, Frank Stabler/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Randy Young/NA/Enron@Enron, Edward E Graham/SA/Enron@Enron, Paula Porto/SA/Enron@Enron cc: Subject: CADE - CEG/CEG-RIO Gente: We won the batle. Now no more problems with Cade. It was 6 x 0 in favour of Cegs or its shareholders. Details to follow tomorrow.
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