Brazil's Cedae cancels IPO, citing 'adverse market conditions'

* Cedae's is third IPO postponed or cancelled this year

* Utility sector seen vulnerable to political meddling

SAO PAULO, March 11 (Reuters) - Brazil's Nova Cedae, a water and sewerage utility controlled by the state of Rio de Janeiro, on Monday a cancelled plan to sell shares to investors in a transaction that at one point was expected to raise up to 1.6 billion reais ($820 million.)

In a securities filing, the company, whose full name is Companhia Estadual de Aguas e Esgotos, said that "given the current adverse market conditions, both the main shareholder and the advisor on the transaction decided that it is timely to cancel now the offering." The company aimed to price its initial public offering last month.

Cedae was another victim of plunging confidence in local utilities after moves by President Dilma Rousseff sparked the view that the sector is too vulnerable to political meddling. In August, Rousseff, seeking to cut Brazil's sky-high power rates, changed terms of a concession-renewal plan, leading to hefty market value losses for distribution and generation utilities.

The utility had hired BTG Pactual Group, Bank of America Merrill Lynch, Banco do Brasil SA and Banco Bradesco SA to manage the IPO.

The decision underscores expectations that access to Brazil's IPO market will remain shut for companies with insufficient track records, poor earnings visibility or vulnerability to a downturn. Including Cedae's, three IPO transactions have already been postponed or canceled this year, with only one having been concluded successfully.