BUENOS AIRES -(Dow Jones)- In a new bid to exert greater control over key private companies, the Argentine government on Monday said it would start "co- managing" one of the country's leading natural gas distributors, Transportadora de Gas del Norte SA (TGN).

The news comes a week after TGN said it would default on an upcoming debt payment and two weeks after Congress voted to expropriate Argentina's leading airline from the Spanish-owned travel company, Grupo Marsans.

"If we see that the company really is in a default situation because of administrative problems, surely we'll have to takeover management because we can't allow it to enter into a kind of operational default," Planning Minister Julio De Vido said at a news conference. "An operational default could affect users and the energy infrastructure. We can't allow that to happen."

De Vido said a state-appointed comptroller will oversee the company's operations for a period of 120 days.

"This isn't a substitute for the board of directors," he said. "The company will be co-managed."

But De Vido said if the temporary oversight plan fails to improve the company's balance sheet, the government could rescind TGN's public utility contract.

A TGN spokesman wasn't available for comment.

TGN is supposed to make a $22.2 million debt payment Dec. 31. Last week the company said it would postpone the payment, noting a "depreciating peso and frozen utility rates" had weakened its finances.

Not everyone sees the move to "intervene" in TGN as temporary. And some think the intervention is part of a plan by President Cristina Fernandez and her husband and predecessor, Nestor Kirchner, to take over the company.

"They're interested in putting friends into positions of power in these companies," said Gerardo Rabinovich, a director at the Argentine Energy Institute. "This is what they did at YPF and Transener and Edenor."

Earlier this year a group led by Argentine businessman Enrique Ezkenazi, who reportedly has close ties to the Kirchners, bought a nearly 15% stake in YPF, which is majority controlled by Spain's REPSOL.

Indeed, YPF used to be known as REPSOL-YPF, but after Ezkenazi entered the company it dropped the word REPSOL.

Former economy minister Roberto Lavagna last year slammed Ezkenazi's purchase of YPF shares, saying it was equivalent to government-sponsored "crony capitalism."

Others say the Kirchners have no personal interest in having friends in these companies but instead want to make sure the companies are controlled by Argentines.

"The Kirchners have been pursuing a strategy of driving out foreign investors and replacing them with a local Argentine bureaucracy," said an energy industry official.

This appears to have happened at numerous private companies where foreigners have been key shareholders.

The government nationalized Aguas Argentinas, the nation's main water utility, in 2006 after contract re-negotiations collapsed with the then-operator, French utility giant Suez (12052.FR ).

In May 2007 French electricity giant Electricite de France SA (1024251.FR) said it had sold all of its 25% stake in the power distributor Edenor.

"All of this is part of the Kirchner's strategy to put key privatized businesses back in the hand of Argentines," said the energy industry official.

"The government clearly wants to have a bigger participation in these companies," said Rabinovich. "Look at what happened recently with Edelap. It's the same thing."

Earlier this month Argentina's electricity regular, ENRE, filed charges against Edelap in a federal criminal court, accusing it of "irregular" accounting practices.

Edelap is controlled by U.S.-based AES Corp. (AES). Earl Wayne, the U.S. Ambassador to Argentina, called on the local court system to ensure a "fair and open" legal process.

"The government looks for any excuse it can find to move in on these companies," said the energy official, reflecting widespread sentiment among private sector executives.

Rabinovich said while the cases may differ with each company, the government's goals are the same.

"There's a perverse relationship between companies and the state that allows situations like this to arise," he said. "This case is not any way distinct from Aerolineas."

-By Taos Turner, Dow Jones Newswires; 5411-4590-2421; taos.turner@dowjones.com

(Shane Romig contributed to this story.)

  (END) Dow Jones Newswires
  12-29-08 1456ET
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