* Break-up may help solve problems at debt-laden group
* Rede has struggled to sell stake to potential buyers
* Cemig, Equatorial may keep some Rede units -sources
BRASILIA/SAO PAULO, June 12 Brazil's government
is considering a break-up of debt-laden power holding company
Rede Energia, which is struggling to operate as one
of its units faces bankruptcy, three sources with direct
knowledge of the situation told Reuters.
One option under analysis is transferring control of Celpa,
the unit that filed for bankruptcy protection in February, to
rival Equatorial Energia, one of the sources said on
Tuesday. Units of Rede Energia that operate in the states of
Mato Grosso do Sul and Minas Gerais could be sold to Cemig
, the same source added.
"That's for sure under consideration," a second source said,
adding that the break-up is the most-favored option among
government officials since it may minimize service disruptions.
Transferring control of such units to Rede Energia rivals
instead of inexperienced bidders in the distribution sector may
also protect customers, the three sources noted.
Interest in some power assets has grown in recent months as
the government and private companies seek to boost their market
share in power distribution, in order to offset the risk of
declining rates in coming years. Consolidation is key for the
companies to gain financial and operating muscle.
But in the case of Rede Energia and, specifically of Celpa,
interest from potential buyers has been feeble since both
companies announced intentions to seek an out-of-court debt
That has kept the planned sale of all or part of Rede
Energia Chairman and controlling shareholder Jorge Queiroz Jr's
54 percent stake in the group stalled since the end of the
PRIVATE EQUITY INTEREST
So far, Equatorial, controlled by local buyout giant Vinci
Partners, and GP Investments, the largest Latin
American private equity firm, have been linked to a purchase of
Private equity firms have been seen by many investors as the
most likely buyers of Celpa because of their perceived ability
to turn around companies in poor health. A group of Brazilian
and foreign investors led by buyout firm Laep Investments
could also bid for Celpa, Reuters reported in April.
Calls made to press representatives of Rede and the media
office of Equatorial were not immediately answered. Cemig
declined to comment for this story.