nationalization business definition
A government takeover of private property or operations. The government may or may not compensate the property owners. Multinational companies with operations in developing countries have frequently seen their assets nationalized.Case Study
In January 2007 Venezuelan President Hugo Chavez announced that he intended to accelerate the country's socialist revolution by nationalizing some private firms, including telephone and utility companies. Chavez also indicated the country would become more heavily involved in foreign-operated domestic oil projects. The announcement produced a 19% decline in Venezuela's stock market and a major weakening of its currency. U.S.-based AES became a major target of the nationalization. AES is one of the world's largest global power companies, with operations in 26 countries on five continents. In Venezuela the firm owned 82% of a Caracas electric utility that it had purchased in 2000 for $1.6 billion. The Venezuelan utility generated approximately $100 million in annual dividends for the company. Although some analysts thought the 18% public ownership of the utility might provide some protection from nationalization, this was not the case. In February 2007, AES announced that it would be selling its 82% stake in the utility to Venezuela's state-owned oil company for $739 million. As a result, AES expected to record a pretax impairment charge of from $550 to $650 million during the first quarter of 2007.
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