CENTRAL TÉRMICA GÜEMES S.A.
Javier García Sánchez & Valeria L. Romero
IAE – Management and Business School, Universidad Austral
This case provides an excellent frame to analyze and evaluate the disinvestments alternatives shareholders have on a company with debt untenableness involved in an emerging market. The emphasis is also placed in a possible Management Buy Out and its potential to restructure a company of these characteristics. The case also offers the possibility of going into the difficult road to companies valuation in emerging markets, and to discuss the problems faced by those companies that decide to be part of a deregulation and privatization process of public services in unstable countries.
The case and teaching note are designed to be used in Advanced Corporative Finances courses, considering students have already learnt company valuation techniques.
Central Térmica Güemes was an energy generating company placed in the Northwest of the Argentine Republic. It was acquired by a consortium composed of Duke Energy, the American company; the Spanish Iberdrola and the Argentine Comercial del Plata when the privatization process in the electric market began. This market became highly competitive and the results of the station were very compromised given the bulky debt the company had contracted years before with foreign investors.
By the end of 1998, and realizing that the company lacked long term sustainability, the shareholders had to decide what to do with CTG, the future of the company depended on them. Meanwhile, the management considered a Management Buy Out as a different alternative for the shareholders.
This case was prepared by Javier García Sánchez and Valeria L. Romero, IAE-Management and Business School, Universidad Austral, and is intended to be used for class discussion rather than to illustrate either effective or ineffective handling of the situation.
Presented to and accepted by the North American Case Research Association (NACRA) for its annual meeting, November 2003, Tampa, Florida. All rights reserved to the authors and NACRA. © 2003 by Javier García Sánchez and Valeria L. Romero.