Reuters: Regulatory News: UPDATE 1-Brazil's São Paulo state says utility sale still option

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UPDATE 1-Brazil's São Paulo state says utility sale still option Oct 3rd 2012, 18:24 Wed Oct 3, 2012 2:24pm EDT * Sale remains an option for São Paulo, official says * Folha reported sale of Cesp was ruled out this year * Recent Rousseff steps marred confidence in industry By Anna Flávia Rochas RIO DE JANEIRO, Oct 3 (Reuters) - The sale of electric utility Cesp remains an option for São Paulo state, the company's controlling shareholder, a state official told Reuters on Wednesday. The comment came in response to a newspaper article reporting that plans to sell the asset were on hold. A stake sale in Cesp to investors could be decided any time next year, São Paulo State Planning Secretary Julio Semeghini said in a phone interview. Current regulatory uncertainty in the power industry forced Governor Geraldo Alckmin's administration to exclude the Cesp sale as a potential revenue source for the state's 2013 budget. "No matter if it's in the budget or not, the government can go for a stake sale if (they) are positive about it," Semeghini said. Semeghini said investor confidence in the sector sank following a decision by the federal government to renew dozens of expiring power licenses currently held by Cesp and rivals in exchange for a hefty reduction in rates. The decision led the company's stock to fall by nearly one-third over the past month. Federal government moves to demand cuts in electricity rates of about 20 percent to consumers in exchange for renewing maturing concessions to operate hydro dams has made it unattractive to sell all or part of the stake in Cesp, newspaper Folha de S. Paulo reported on Wednesday, citing Semeghini. According to Folha, the state had scrapped a potential sale of Cesp, Brazil's No. 3 power generator, to Furnas, a generation unit of state-run Eletrobras SA. Concessions to generate nearly one-fifth of the electricity in Brazil, the world's sixth largest economy, will expire between 2015 and 2017. Cesp, 94 percent owned by the state of São Paulo, is one of the largest holders of maturing concessions after Eletrobras. Preferred Class B shares of Cesp, the company's most heavily traded stock, tumbled 5 percent on Wednesday. The stock has fallen 33 percent since Sept. 1. Since the government decided to renew generation concessions in exchange for power rate cuts on Sept. 11, the Electrical Utilities index of the Sao Paulo stock exchange has fallen about 9 percent. Link this Share this Digg this Email Reprints

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