Electrical Shocker: “Light Gives Up On CESP Fight”

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Call options on São Paulo’s state electricity generator. Source: Bovespa. Click to zoom.

Light desistiu de leilão da Cesp devido a risco do fim de concessões em 2015, diz executivo: “Light gives up on CESP privatization auction due to risk of concession nonrenewal in 2015, executive says.” Valor (Brazil) reports.

I have not had time to really study this deal — my job at the moment is to study other things — but I can note that CESP’s share price sank 10% yesterday on the eve of the privatization auction on doubts that the state government of São Paulo will get a decent price for its electrical generator.

And the Mrs. reported heavy pamphleting by unions against the privatization on the streets (she is taking classes at USP). They argue that because other state-controlled firms, such as SABESP (the state sanitation company) own most of CESP, the deal requires legislative approval.

Again: I am not well-informed on the deal, and do not quite understand why, assuming I were a Brazilian (which I am not), I should be for or against the deal. The basic idea, I gather, was to liquidate the asset in order to invest in transportation infrastructure without getting the state into debt. Which is not a wholly insane proposition, it seems to me.

And if you complain that state-owned firms are lousy with skeevy political patronage, which is an argument of the opposition — also not without some basis in fact — well, how about getting the state out of the business, then?

RIO – O presidente da distribuidora de energia carioca Light, José Luiz Alquéres, confirmou que a empresa chegou a analisar as condições para participação no leilão da Cesp, marcado para a próxima quarta-feira. O executivo explicou que a companhia não chegou a se qualificar devido ao risco de que a concessão das usinas de Jupiá e Ilha Solteira – que representam 67% da geração da empresa paulista – se encerre em 2015, sem direito a renovação.

The president of Rio energy distributor Light, Mr. Alqúeres, confirmed that his firm has analyzed the conditions for taking part in the CESP auction, scheduled for Wednesday. He explained that Light did not enroll due to the risk that the concessions for Jupiter and Ilha Solteira — which represent 67% of CESP’s generation — will expire in 2015, without the right of renewal.

“Olhamos Cesp numa fase preliminar, mas não chegamos nem a nos qualificar (para o leilão)”, frisou Alquéres, que participou hoje do seminário Cenários da Economia Brasileira e Mundial em 2008, promovido pela Fundação Getulio Vargas (FGV) e pela Federação das Indústrias do Estado do Rio de Janeiro (Firjan), com o apoio do Valor Econômico.

“We looked at CESP in a preliminary phase but did not end up trying to qualify (for the action,” he said during a Vargas Foundation and FIRJAN conference co-sponsored by this newspaper.

O executivo explicou que o fim da concessão está previsto na lei 9.074, de 1995, sem previsão de renovação. Alquéres ponderou que o ideal seria a renovação automática, desde que os concessionários comprovem a qualidade no serviço, “como acontece em qualquer lugar do mundo”.

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“Não dá para pagar o preço da Cesp correndo o risco de não ter a concessão renovada. O preço mínimo é incompatível com a não renovação da concessão. Quem comprar tem que apostar que em 2015, no governo do sucessor do sucessor do presidente Lula, ele conseguirá a renovação”, frisou Alquéres.

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Atualmente, disputam a Cesp as empresas Alcoa, CPFL, Energias do Brasil, Neoenergia e Tractebel. O preço mínimo estabelecido é de R$ 6,6 bilhões.

This press release is more of the sort of thing I am supposed to be running after at the moment:

CHICAGO & RIO DE JANEIRO, Brazil–(BUSINESS WIRE)–Fitch Ratings affirms the National Scale rating of Eletropaulo Metropolitana de Eletricidade de Sao Paulo S.A.’s (Eletropaulo) 9th Issuance of debentures at ‘A (bra)’. The 9th issuance of debentures has a face value of R$250 million due 2018. Fitch rates Eletropaulo as follows:

–Local currency Issuer Default Rating (IDR) ‘BB-‘;

–Foreign currency IDR ‘BB-‘;

–Senior unsecured notes Due 2010 ‘BB-‘;

–Debentures – 10th Issuance due 2013 at ‘A(bra)’;

–Debentures – 11th Issuance due 2018 at ‘A(bra)’;

–Syndicated Bank Credit Facility (CCB) due 2015 at ‘A(bra)’;

–National long-term scale ‘A(bra)’;

The Outlook is Stable for the corporate ratings.

Eletropaulo is the largest electricity distribution company in Latin America in terms of revenues. The company is a natural monopoly and distributes electricity to approximately 5.5 million clients in 24 municipalities in the metropolitan region of greater Sao Paulo, Brazil. Eletropaulo is indirectly controlled by the Companhia Brasiliana de Energia.

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The GZ today feature some guy in front of a local landmark: The Oh Tacky (Ohtake) Bldg. Sort of the Williamsburgh Savings Bank of the Vila Maddá. GZ’s online subscription form fails catastrophically over and over again, and there is not a single newsstand outside the Av. Paulista that carries the dang paper. What is up with that?

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