Rede Energia Units Given Ultimatum by Brazilian Regulator

Rede Energia SA (REDE4) electricity distribution units have a year to prove their financial and operational viability or lose concessions, Brazilian electricity regulator Aneel said.

Regulators voted to begin a one-year intervention process at eight companies owned by Rede Energia including Centrais Eletricas Matogrossenses SA. (CMGR4) Regulators voted on the interventions in Brasilia today.

The companies will have two months to submit plans for improving service quality and guaranteeing debt payments, chief regulator Nelson Hubner told reporters yesterday. If the companies fail to meet standards and lose licenses their debt remains the responsibility of Rede Energia, he said.

The intervention period may include capitalization and discussions with banks to reduce debt levels, he said, without elaborating.

Separately, creditors of Rede Energia’s Centrais Eletricas do Para SA (CELP3) are scheduled to meet tomorrow to discuss a takeover bid by Equatorial Energia SA. (EQTL3) Celpa, as the biggest distributor in the country’s Amazon region is known, is operating under bankruptcy protection. If the bid isn’t approved and the company is declared bankrupt, the government would auction Celpa’s concessions, Hubner said.

To contact the reporter on this story: Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net