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Brazil Puts Eletrobras Up For Sale For 30 Cents: But Is It Really A Bargain?

Power

The largest power utility in Brazil, Eletrobras, will auction its electricity distribution subsidiaries for the symbolic sum of US$0.31 (1 real), with the winner to be selected based on what they offer as distribution rates for customers. The lowest bid will win.

Reuters cited sources in the know as saying that this approach to the divestment will motivate the winning bidders to invest the money they would have otherwise spent on the acquisitions in improving the service that these units, all of them laden with substantial debts, provide.

“The idea is to sell the distributors to whoever offers to charge the lowest rates, because the consumer has nothing to do with the company’s problems, and sell for 1 real. Otherwise, nobody would be interested,” one of the sources explained.

The auction for the six Eletrobras subsidiaries is scheduled for some time in the first quarter of 2017 and following the sale, the Brazilian government will privatize the parent company.

Earlier this month, Reuters cited a government source that said Eletrobras will have to sell the six distribution units at a loss, and that the proposal to sell them to whoever offers to raise electricity rates the least came from the country’s electricity industry watchdog, Aneel.

Related: Oil Prices At A Ceiling, Or Just Getting Started?

The source also said that Italy’s Enel, Brazilian Neoenergia and Equatorial Energia, as well as investment firms were among the parties interested in buying one or more of the distribution subsidiaries of Eletrobras. The State Grid Corp of China is also considering an investment in the distribution units, according to a company executive.

Next month, Eletrobras will start selling its interests in various ventures, including wind farms and transmission lines. The company is involved in 178 specific-purpose ventures and will sell its stakes in 77 of these, chief executive Wilson Ferreira said.

By Irina Slav for Oilprice.com

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  • Michael Rubin on September 29 2017 said:
    Irina, can you explain how the auction "is scheduled" for the first quarter of 2017 if you wrote the article today?

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