Nicaraguan government buys stake in Union Fenosa

MANAGUA, May 29 (Reuters) - Spanish utility Union Fenosa agreed to sell a 16 percent stake of its Nicaraguan unit to the government on Thursday, wiping out more than $10 million in debt the company had with Managua, the capital city.

The agreement, signed by the country's energy minister and the vice president of Union Fenosa (UNF.MC), will allow for government participation in the company's board.

"We are going to work together," energy minister Emilio Rappaccioli told a news conference.

Nicaragua, which has a precarious power system, suffers from daily blackouts across the country. Union Fenosa enjoys a virtual monopoly in the power distribution in Nicaragua since 2000.

Leftist President Daniel Ortega has blamed Fenosa for the blackouts in the impoverished Central American nation.

Ortega's ally Venezuelan President Hugo Chavez has nationalized various industries but the Nicaraguan leader, a former guerrilla, has not gone down that road.

Nicaragua said in October it authorized Union Fenosa to raise electricity tariffs by 9.06 percent, to allow the Spanish utility firm to keep up with higher fuel costs. (Reporting by Ivan Castro; Editing by Gary Hill)