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Cesp Could Be Bought After Rejecting License Renewals, CEO Says

Dec. 7 (Bloomberg) -- Cia. Energetica de Sao Paulo, Brazil’s second-largest electricity generator by capacity, said it may be taken over after rejecting license renewals for its biggest dams. The shares jumped to a seven-week high.

Cesp, as the company is known, “could be bought,” Chief Executive Officer Mauro Arce said in an interview in Sao Paulo today. No negotiations for the sale are taking place, he said. The company’s priority is to “pay off debt, not to invest,” he said.

The utility controlled by the state of Sao Paulo this week decided to reject the renewal of three hydroelectric dam concessions expiring in 2015 because of new rules lowering electricity rates. The dams generate 70 percent of Cesp’s power.

Cesp reversed losses to jump as much as 3.1 percent in Sao Paulo trading after Arce’s comments. The shares rose 0.7 percent to 19.54 reais at 12:52 p.m. A close at that level would be the highest since Oct. 19.

The government of Sao Paulo, which controls Cesp through a 94.1% percent voting stake, has postponed plans to sell shares at least three times as it waited for the federal government to announce the terms of the concession renewals.

To contact the reporters on this story: Christiana Sciaudone in Sao Paulo at csciaudone@bloomberg.net; Rodrigo Orihuela in Rio de Janeiro at rorihuela@bloomberg.net

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

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