By Taos Turner
BUENOS AIRES--YPF SA (YPFD.BA, YPF), the Argentine state-run oil
company, has exercised an option to buy majority control of
natural-gas distributor Metrogas SA (METR.BA).
"The goal of YPF's decision is to make Metrogas a more efficient
and profitable company," YPF said in a statement without disclosing
the price it paid.
The purchase comes just days after BG Group PLC (BRGYY, BG.LN)
agreed to sell its stake in Metrogas to other investors, but that
sale was subject to YPF's option to exercise its "first refusal"
right to make a similar or superior offer for the stake.
YPF now indirectly holds a 70% stake in Metrogas through
Metrogas's controlling company, Gas Argentino SA. Metrogas provides
natural gas to around 2.2 million customers in and around the
capital city of Buenos Aires. Through Metrogas, BG held a 35-year
license to distribute gas in the capital city of Buenos Aires.
Like so many other energy utilities in Argentina, Metrogas has
struggled to keep afloat over the past decade.
It has suffered from the country's decade-old freeze on utility
rates. While rates have been mostly frozen since 2001, operating
costs have surged amid high inflation, rapidly rising labor costs
and soaring demand from consumers.
Metrogas consistently has reported losses in recent years, as
have some other energy utility companies.
Economists say annual inflation totals around 25%, putting
pressure on almost all companies, but especially on utilities that
are banned from raising prices to compensate.
But YPF officials are confident they can turn Metrogas around.
They are also confident that YPF's relationship with the
government, which is YPF's majority shareholder, will give YPF
additional leverage in being able to make Metrogas profitable.
Write to Taos Turner at taos.turner@dowjones.com
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