Eletrobras to take over bankrupt north Brazil power utility

Tue Nov 13, 2012 10:06am EST

Related Topics

* Deal aims to lift utility's finances, recover debts

* Agreement to see Eletrobras take majority stake in CEA

* Eletrobras shares down more than 20 pct this month

SAO PAULO, Nov 13 (Reuters) - Brazilian state-led power company Eletrobras said it would take over Companhia de Eletricidade do Amapa in northern Brazil to help restructure the bankrupt utility and recover debts.

Eletrobras and the Amapa state government will first have to sign shareholder and management agreements aimed at restoring CEA to financial health, Eletrobras said in a statement on Tuesday.

Amapa authorities will receive financing from Brazil's federal government to pay off CEA's debts to Eletrobras and other suppliers.

The statement did not state how much Eletrobras, Latin America's largest utility, expects to pay for a majority stake in CEA.

Brazil's electrical power industry has seen a wave of bankruptcies this year, particularly in remote and sparsely populated regions where utilities have difficulty generating revenue needed to cover costs and extend service.

Eletrobras Chief Executive Officer Jose da Costa Neto said in October that it would be in his company's interest to take over CEA and CERR, an Amazon-region utility owned by Brazil's state of Roraima, if state governments took over the utilities' debts.

Eletrobras used a similar model to take over utility Celg in the central state of Goias in April.

Eletrobras preferred shares fell 4.3 percent to 13.02 reais in morning trading on Tuesday on Sao Paulo's BM&FBovespa exchange.

The stock has lost more than a fifth of its value since Nov. 1 because of the government's decision to renew expiring hydro dam concessions in exchange for cuts in power rates.

Besides cutting Eletrobras' revenue, the renewal plan also involves an estimated 14 billion reais ($6.83 billion) that the government will give the company to cover the cost of investments it made but has been unable to fully recoup under the terms of the concession contract.

The indemnity is less than half of what Eletrobras originally expected to receive.

For more details on the renewal of power utility concessions, see:

($1 = 2.0506 Brazilian reais) (Reporting by Vivian Pereira; Writing by Peter Murphy; Editing by Jeb Blount and Lisa Von Ahn)

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