* Plan on license renewals stirs power sector uncertainty
* CPFL Renováveis had sought to list shares in October
* Brazil IPOs struggle on weak market, regulatory concerns
By Guillermo Parra-Bernal and Cesar Bianconi
SAO PAULO, Oct 4 CPFL Renováveis, the
alternative energy unit of Brazilian utility CPFL Energia
, has abandoned plans for an initial public offering,
saying recent government meddling in the electricity sector had
undermined investor confidence.
The Sao Paulo-based company said on Thursday it asked
regulators to scrap the plan, citing the global economic
downturn and the federal government's decision to aggressively
reduce energy rates when it renews utility contracts for power
transmission and distribution companies.
Although the license renewal plan does not have any direct
impact on CPFL Renováveis itself, Chief Executive Miguel Abdalla
Saad said in a statement: "The losses that investors incurred
because of those steps and uncertainty over their effect made
Brazil's President Dilma Rousseff, who announced the plan
last month, is seeking to renegotiate expiring electric power
concessions with steep rate cuts, to bring down some of the
world's highest energy bills. The Sao Paulo bourse's index of
shares in electricity companies has tumbled almost 20
percent since mid-September as investors spurned the sector due
to the new policy.
The withdrawal of CPFL Renováveis's plans highlights how
Brazil's once-hyped market for initial public offerings is
growing unattractive for skittish buyers in an unpredictable
financial and regulatory environment in Latin America's largest
Sources had told Reuters that the company's controlling
shareholder was seeking to fetch up to 1 billion reais ($495
million) with the IPO.
The decision signals that even well-established groups with
solid track records such as CPFL Energia are facing investor
skepticism over IPOs in Brazil. So far this year, just four IPOs
have successfully priced in Brazil, with shares trading around
or slightly below their listing prices.
Apart from CPFL Renováveis, seven other planned flotations
on the Sao Paulo Stock Exchange have collapsed due to
challenging market conditions or the inability to lure potential
Investors, who have tended to steer clear of most IPOs in
Brazil since mid-2011 as Europe's debt crisis worsened, are
shunning companies with insufficient track records, poor
earnings visibility, or vulnerability to a downturn or
The company had hired the investment banking units of Banco
do Brasil, Bank of America, Banco Bradesco
, Itaú Unibanco Holding and Morgan Stanley
& Co to manage the offering.