Cesp Gains on Outlook State to Approve Privatization

Cia. Energetica de Sao Paulo, or Cesp, as the state-controlled power company is known, gained the most in more than nine months in Sao Paulo trading on speculation the government would approve the sale of its stake today.

The state government of Sao Paulo, which holds about 94 percent of voting shares, was scheduled to discuss the sale of Brazil's third-largest power generator, Valor Economico reported.

``If the privatization is approved today, Governor Serra has strong incentives to move ahead,'' UBS Pactual strategist Pedro Batista wrote in a note, referring to Sao Paulo Governor Jose Serra. The strategist expects the sale price to be as high as 60 reais a share, 76 percent more than yesterday's closing price.

Cesp jumped 8.7 percent today to 36.94 reais. The Sao Paulo- based company gained 15 percent since the government said Nov. 1 it had hired Citigroup Inc. to coordinate the sale. The Bovespa Index of the most-traded stocks on the Sao Paulo exchange fell 1.4 percent during the same period.

The sale of Cesp could happen as early as the first quarter of next year, Batista wrote in a research note today.

A spokesman at the press office of Sao Paulo's Finance Ministry said he didn't have information on whether the government was meeting today to discuss the privatization.

To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.

To contact the editor responsible for this story: Chris Nagi at at chrisnagi@bloomberg.net.

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