* 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 (Reuters) - 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 markets wary."
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 economy.
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 buyers.
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 regulatory risk.
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.