Argentine Utilities Surge on First Rates Increase Since 1999 By Camila Russo

Argentine natural gas distributor shares are having their best week since October after the government allowed the first rate increases in 15 years.

Transportadora de Gas del Norte SA shares have jumped 18 percent this week, the most since October, and were up 4.1 percent today to a six-year high of 2.02 pesos at 4:08 p.m. in Buenos Aires. Metrogas SA shares have rallied 13 percent this week to 1.98 pesos, the highest since 2004.

Argentina froze utility rates in 2002 to help fuel economic recovery after a financial crisis drove the country to default on $95 billion. While natural gas prices have been largely capped since, inflation at around 25 percent made costs surge, eroding companies’ income. This week’s increase is a step toward improving their finances, according to Mariano Tavelli, president of brokerage Tavelli & Cia.

“We’ll have to wait and see the real effect on balance sheets but any tariff increase is good,” he said in a telephone interview from Buenos Aires. “If this means the situation is beginning to normalize for these companies, prices are still very cheap.”

The government allowed natural gas distributors to increase rates charged to residential and commercial users by 200 percent to 650 percent, depending on the company, area and type of user, according to a resolution published in the official gazette April 7.

Part of the rates will be used to pay for the difference in natural gas prices, which also increased.

The higher rate won’t be applied to users who reduce consumption by 20 percent.

“While it probably won’t make a huge difference in the bottom line, it’s a very good sign,” said Andres Chambouleyron, a senior consultant at Chicago-based consultancy Compass Lexecon LLC. “The government recognized these companies are in trouble and did something about it.”