Latin America: European and Brazilian firms eye Eletrobras distribution auction 

21 March 2018 - 12:00 am UTC

Spain’s Iberdrola, France-based Engie, Italy’s Enel and Brazilian companies Energisa, Equatorial Energia and Neoenergia are considering participating in the forthcoming auction of six power distribution units by Eletrobras, Inframation understands.

All six companies were named by a government source as expressing an interest in the auction, which is expected to take place on 4 May at the B3 stock exchange in São Paulo.  The companies did not comment by time of publication.

Several of the bidders have signed a non-disclosure agreements to gain access to Eletrobras’ data room before potentially submitting a bid, the source added.

Enel and Engie’s participation was confirmed by a second source briefed and Equatorial Energia’s participation verified by a third source close to the auction.

Mattos Filho, Veiga Filho, Marrey Jr. and Quiroga Advogados is giving counsel to Equatorial Energia, sources said.

Meanwhile, Iberdrola did not comment on whether it would work with Machado Meyer, which gave counsel to the company on the sale of two energy distribution companies to Neoenergia in 2015.

Neither law firm would comment .

The six companies up for sale are Boa Vista Energia SA, Centrais Elétricas de Rondônia (Ceron), Companhia de Eletricidade do Acre (Eletroacre), Companhia Energética de Alagoas (Ceal), Companhia Energética do Piauí (Cepisa), and Amazonas Distribuidora de Energia SA (Amazonas Energia).

Eletrobras previously announced it would either assume BRL 11.2bn (USD 3.4bn) in debt plus additional liability to sell controlling stock in the six units or liquidate them. The state-run company also intends to sell each of the six distributors for a symbolic price of BRL 50,000, although successful bidders will have to make an initial capital injection into the six distributors of BRL 2.4bn and a total of BRL 7.8bn within the first years.

Brazil’s Ministry of Mines and Energy is coordinating and monitoring the privatization.

“The price is BRL 50,000, but this is misleading because on the first day, the successful bidder will also have to invest between BRL 400m and 700m depending on the company,” said Ricardo Brandão Silva, special advisor to the Minister of Mines and Energy, referring to the high capex requirements. “When you have a company that is really in bad shape, the first reaction is ‘Why should I go through this awful business?’, but the reality is that they are in bad shape because of awful management and so also have a great opportunity of turnaround.”

BNDES is leading the privatization process alongside the Mais Energia B Consortium, comprised of auditor PriceWaterhouseCoopers, regulatory consultancy Siglasul and law firm Loeser e Portela Advogados Associados – and Ceres Inteligência Financeira, which helped design the privatization model. 

Pinheiro Neto Advogados also assisted on the modelling of the auction, according to a source advising one of the companies. Pinheiro Neto did not immediately respond to request for confirmation.