With No Buyers, Brazil’s Eletrobras Delays Sale of Distributor

  • ‘If no buyer appeared, it shows the asset was expensive’
  • Company’s Celg-D distribution unit has $718 million in debt

Brazil has delayed the sale of Eletrobras’ biggest energy-distribution unit, a blow to the government’s plans to bolster the indebted company’s cash and curb its deficit.

Not a single bid was submitted for Celg-D, and Sinval Gama, president of the unit based in Goiania, Goias state, said the price set by the government was too high.

“If no buyer appeared, it shows the asset was expensive,” Gama said in a phone interview Tuesday. “Nobody is better than the market to say whether a certain company is expensive. Now we have to figure the correct price out.”

Celg Distribuicao SA, as the unit is formally known, has 2.3 billion reais ($718 million) in debt, according to Gama, and the minimum price set by the government was 2.8 billion reais.

The auction set for Friday has been canceled, according to an e-mailed statement from the Energy Ministry. Companies interested in participating had to submit proposals in sealed envelopes Tuesday. The event will be rescheduled for September, Goias state governor Marconi Perillo told reporters Tuesday.

Expensive

“Celg-D is expensive and everyone thinks so,” Henrique Peretti, Latin America utilities analyst at JPMorgan Chase & Co. in Brazil, said in an Aug. 10 interview. “Companies are showing a lack of interest in the asset because the buyer would have to spend on the auction and invest a lot in five years to improve the company’s performance.”

Centrais Eletricas Brasileiras SA, as Brazil’s biggest electric utility is formally known, is seeking to sell some operations to raise cash. The state-owned company has 45 billion reais in debt, its investor relations director said Tuesday during a conference call.

After the government installed new management in an effort to improve efficiency, the company is focusing on its generation and transmission operations, new Chief Executive Officer Wilson Ferreira said on the call. State-owned companies have had difficulty running distribution companies, he said.

Brazil will probably reduce the minimum price for Celg-D sale to about 2 billion reais, Reuters reported, citing two lawmakers familiar with the matter. Celg-D serves 237 cities in the state of Goias, in Brazil’s Midwest.

“I wasn’t expecting that,” said Gama. “Celg is a good asset, in a good area. We need a new, well-capitalized shareholder as the current two do not have financial capacity. While we don’t have it, the company has no plan to pay its debts and to reinvest and grow.”

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