AEN.L Share News (AEN)

By Taos Turner Of DOW JONES NEWSWIRES BUENOS AIRES (Dow Jones)--Andes Energia PLC (AEN.LN), an Argentine-based energy group, expects its shares to start trading on the Buenos Aires Stock Exchange this week, the company's chief executive said in an interview. Andes isn't issuing new shares but is instead allowing local investors to buy shares already traded in London and New York. This will be the first new company added to the Argentine exchange since May 2008. Andes Energia owns a 60-megawatt hydroelectric power plant in Chubut province, an electric power generation company in Mendoza province, and interests in 16 oil and gas exploration blocks. The company posted a profit of $4 million in 2009, compared with a loss of $13 million in 2008. Argentina's securities commission, or CNV, has already approved the deal, but trading has been held up because of a logistical issue requiring Andes to place some of its shares into an Argentine depository account. "We had considered issuing new shares in 2008," Luis Alvarez Poli said Thursday from his office in this city's hip Palermo Hollywood neighborhood. "But that was before the nationalization of the pension fund system." In late 2008, as the global financial crisis was roiling capital markets, the government announced it would nationalize Argentina's private-sector pension system, with some $30 billion in assets. In one fell swoop, the government eliminated a major source of corporate financing. The system was taken over by the social security agency, Anses, which has since used much of that capital to fund public spending. Anses has done relatively little to make financing available to private sector companies like Andes. "We could probably raise between $40 million and $50 million if the pension funds were still around," said Poli. Andes has not discarded the possibility of issuing new shares to raise fresh funds, but has no immediate plans to do so. Poli said one advantage of trading on the Buenos Aires exchange is that local investors are more accustomed than foreign investors to Argentina's tumultuous economic cycles. That should help add stability to the company's stock prices, said Poli, who expects the share prices to rise. Argentine energy sector assets in general are underpriced, he said. But he expects assets and profit margins to rise if and when the government changes price caps that crimp earnings and investment. Andes' market capitalization totals $35 million to $40 million while its assets are valued at around $300 million, Poli said. Last year Andes managed to get a 20% rate hike for Energia Mendocina, or Edemsa, its power distributor in Mendoza province. Bigger distributors in the heavily populated Greater Buenos Aires have been less successful. Given price controls, many energy companies stay in business thanks to billions of dollars in federal subsidies that help compensate for frozen prices. But it's unclear how long the government can afford the subsidies, which total some $6 billion annually. "The challenge will be how to resolve this system," Poli said, noting that demand for oil, gas and electricity is outpacing investment in exploration and production. "I don't think this system is sustainable. If Argentina wants to grow at 8% a year it's going to have bottlenecks." Such bottlenecks have forced Argentina to import gas from Bolivia and Trinidad and Tobago and occasionally import electricity from Brazil, typically at much higher prices than would be paid for local production. "Argentina isn't rich enough to import all its energy," said Poli, adding that imported gas costs three times more than domestic gas. "We can't do it." Argentina will eventually need billions of dollars in foreign financing to ensure that the supply of energy can keep up with demand, he said. Andes is looking for ways to increase investment in production and generation. In terms of generation, the company is studying plans to add a 40 megawatt wind power park to its Hydroelectrica Ameghino SA hydroelectric power plant in Chubut Province, which would increase its total electricity output to 100MW. -By Taos Turner, Dow Jones Newswires; 5411-4103-6728; taos.turner@dowjones.com (END) Dow Jones Newswires June 14, 2010 11:20 ET (15:20 GMT)