Brazil cancels Copel sell-off
THE PLANNED PRIVATISATION of Brazil’s Copel power utility has been cancelled, with the government of the southern Parana state arguing that the planned sale was not viable due to recent sectorial changes.
The current international situation, Argentina’s precarious economy and undefined local energy sector rules, which were proving a deterrent to foreign investors, were given as reasons for the suspension.
A previous attempt to sell Copel in November last year failed on two accounts; with Brazil’s acute power shortages and rationing putting off the three pre-qualified bidders. The government’s regulatory role, meanwhile, remained largely undefined. The government announced a range of measures in January aimed at increasing its role in the power sector. This included an indefinite postponement of the electricity market’s opening to private companies, in a bid to pull it out of crisis and draw fresh investment.
This follows the state government’s consideration of plans to revitalise the stalled privatisation process, such as lowering a base price of almost $2 billion for the utility, dividing Copel into smaller companies or allowing buyers to pay in installments.
Seen as the jewel in the crown of Brazil’s power sector, Copel has 17 hydroelectric plants and one thermal plant with a total capacity of 4,500 MW, accounting for 7 per cent of Brazil’s generation capacity. The country’s energy sector is listing badly though. Brazil relies on hydroelectric plants for over 90 per cent of its energy and following severe droughts and water shortages cutting energy supplies, a harsh power rationing programme was instigated.
Now, Sao Paulo state utility Cesp is the only big name earmarked for sell-off in the power sector. However, some good news for the beleaguered sector is the introduction of new regulations. From 2003, federal public generators will be able to sell off 25 per cent of their energy without restrictions at a price of R$47 ($19) per MWh. Accordingly, stock analysts have increased their target prices for shares in Brazil’s energy companies and are recommending their purchase once more. Prices for Copel, Cesp and Cemig have risen around 6 per cent, while Electrobras’ shares have risen by 11.53 per cent This follows the previous freezing of power prices at R$20 ($8) per MWh.
Further good news came with the announcement by Energy Minister Jose Jorge that energy rationing, in place since last June, will end as Power Economics goes to press.
With water levels at hydroelectric power plants sufficient to allow rationing to end, more rains are expected.
Copyright Wilmington Publishing Ltd. Mar 2002
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