Enel and El Salvador agree to resolve an 8-year dispute on ICSID for $280 M

Enel Green Power has sold the 36.2% stake the company owned in La Geo, a joint venture between Enel and the state of El Salvador to develop geothermal energy in the country, to state-owned INE (Inversiones Energeticas SA de CV).

The agreement comes after a dispute settled on the International Centre for Settlement of Investment Disputes (ICSID) of the World Bank in Washington D.C about eight years ago. Enel and INE have agreed to sell the stakes for approximately $280 million.

The companies started negotiations a few weeks ago "aimed at sealing a mutually beneficial deal". Thus Enel exits from El Salvador.

The full effectiveness of the final settlement of the dispute with the Republic of El Salvador is subject to certain conditions (termination of the pending local litigations against EGP and its representatives) to be verified in the next 6 months.

Enel entered El Salvador in August 2001 when the government - supported by top-level international banks and legal advisors - launched an international public tender to select a strategic partner for the development of geothermal energy in the country. After a competitive tender, Enel was selected to establish the joint venture, “La Geo”, with the Salvadoran state-owned power company, INE/CEL.

In 2002, Enel acquired 8.5% of La Geo and signed a Shareholder Agreement (SHA) that recognized, inter alia, its right to reach the majority in La Geo by capitalizing investments in the company. Over the following years, Enel Green Power, which took over the shares from Parent company Enel, fulfilled its obligations as a strategic partner and thereby increased its stake in La Geo to 36.2%, through the mechanisms provided by the SHA. Nonetheless, INE/CEL has always refused to recognize EGP’s right to further buy-in to La Geo through reserved capital injections in exchange of investments, as provided in the SHA.

Therefore, in 2008, EGP initiated an arbitration proceeding against its partner for breach of the SHA under the Rules of Arbitration of the International Court of Arbitration of the International Chamber of Commerce to which several other legal actions followed up to the decision to seek for a mutually beneficial solution which brought to today’s agreement.