Brazil's Cteep opposes renewing concession on government's terms

Mon Nov 12, 2012 8:26pm EST

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* President Rousseff promised 20 percent drop in electric bills

* Big utilities rejecting terms for renewal of concessions

* Cteep profit fell 30 pct in third quarter

SAO PAULO, Nov 12 (Reuters) - Brazilian power company Cteep said on Monday its board recommended against renewing an expiring concession to transmit power, rejecting the government's plan to lower electricity costs to spur economic growth.

Cteep, which has a concession expiring in 2015, said it will hold a shareholder meeting to discuss the government's new terms on Dec. 3, one day before the deadline for renewing the contract.

The company says it transmits 28.2 percent of the electricity generated in Brazil.

Refusal by large utility firms like Cteep to renew their concessions over fears of cutting into profits has cast doubt on President Dilma Rousseff's ability to provide cheaper electricity in the world's sixth largest economy.

Rousseff unveiled plans in September to lower some of the world's highest energy bills by an average of 20 percent. The central bank says the lower electric rates would slow inflation by half a percentage point in 2013.

Minas Gerais state electricity company Cemig already decided not to renew concessions for three of its hydroelectric dams that produce 2,500 megawatts (MW).

Analysts also expect the Sao Paulo state utility Cesp to reject the extension of concessions in exchange for a commitment to provide cheaper electricity.

Those that refuse to renew the current contracts that expire between 2015 and 2017 will continue to charge higher prices in the near term, making it hard for the government to fulfill its promise of cheaper electricity as of the start of 2013.

Cteep posted third-quarter earnings of 241.3 million reais($117 million) on Monday, down 30 percent from a year ago.

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