Argentina's Congress Approves YPF Takeover Bill
BUENOS AIRES - Argentine lawmakers Thursday gave their final approval to a bill giving President Cristina Kirchner the green light to seize a 51% stake in the country's largest oil and gas producer, YPF SA, from Spain's Repsol YPF SA.
The Lower House overwhelmingly approved the legislation with 207 of its 257 members voting in favor of nationalizing YPF. The bill, which cleared the Senate last week, now heads to Kirchner's desk to be signed into law.
"Starting today in Argentina, oil ceases to be a commodity for YPF. Oil is now a basic resource for economic growth and the development of the country," said Agustin Rossi, who leads Kirchner's left-wing faction of the ruling Peronist movement in the Lower House.
Kirchner also notched a significant political victory as she received the backing of a significant portion of Argentina's fragmented opposition. Her allies in Congress have working majorities in both chambers.
The government seized operational control of YPF on April 16, the same day that Kirchner asked Congress to expropriate the bulk of Repsol's shares in YPF. Of that controlling stake, the federal government will hold 51%, with the remaining 49% split between the provinces.
Kirchner has accused Repsol YPF of not investing enough in Argentina to reverse years of declining oil and gas production that turned the South American nation into a net energy importer for the first time in almost two decades.
Repsol has denied those accusations and pledged to fight the takeover.
The YPF expropriation has strained once cordial diplomatic relations with Spain. The Spanish government said last month that it will stop importing biodiesel from Argentina in retaliation.
More unsettling to investors than the actual expropriation itself is Argentina's treatment of Repsol, which will see its stake in YPF slashed to about 6% from 57.4% today.
Deputy Economy Minister Axel Kicillof, the intellectual architect behind YPF's nationalization, in congressional testimony derided Repsol's $10 billion compensation demand and said the Spanish company might not get a dime once YPF's alleged liabilities are considered.
Argentina's National Appraisal Court will determine what compensation, if any, Repsol YPF will receive in a process that could take years to play out.
For now, Argentina's Eskenazi family will keep its 25.5% of YPF. The government has also signalled that it won't move against the 17.1% float that trades on exchanges in New York and Buenos Aires.
YPF's minority shareholders have dumped the stock, which is down 59% so far this year. Its American depositary shares fell 1.7% to close at $14.15 on Thursday, giving the firm a market capitalization of almost $5.6 billion.
The nationalization enjoys broad public support.
Founded in 1922 as a state-run company, YPF quickly become one of Argentina's largest, and most iconic, firms with gas stations sporting its logo and the national colors dotting the country.
A poll carried out by Poliarquia Consultores and published in newspaper La Nacion last month, showed that 62% of Argentines "agree with the announced plans," while 31% disagree with them.
"It's a historical moment; the recovery of what is ours," said Gustavo Barrera, a Kirchner supporter outside of Congress hours before the final vote.
Only time will tell if the takeover of YPF proves to be prescient or a Pyrrhic victory for Kirchner's government and Argentina.
The energy deficit is expected to more than double to $7 billion this year. That will pressure the country's international reserves, which are a key source of funding for the administration.
Kirchner also has to convince foreign oil companies to invest billions of dollars to bring into production Argentina's vast unconventional oil and gas deposits.
The YPF expropriation bill also declares of "national public interest" nearly all aspects of the oil and gas industry, giving the state broad discretionary power over companies.
Copyright (c) 2013 Dow Jones & Company, Inc.
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