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UPDATE 2-Brazilian state Espirito Santo to sell gas distributor via Sao Paulo exchange

(Adds details throughout from interview with company CEO)

BRASILIA/RIO DE JANEIRO, Nov 25 (Reuters) - Brazilian state Espirito Santo plans to relinquish control of its gas distribution company by selling 25% of the company’s stock in an operation managed by the Sao Paulo stock exchange, officials told Reuters on Wednesday.

The state government currently owns 51% of ES Gas. Fuel distributor BR Distribuidora has the remaining stake, but will also sell 25%, Espirito Santo Governor Renato Casagrande told Reuters ahead of announcing on Thursday the full privatization of the company.

“We are going to sell part of the company via the stock market, at least 25%, and BR Distribuidora will do the same,” he said in a telephone interview. “We’re going to privatize the company, hand over control,” Casagrande said.

Brazil’s national development bank BNDES is being hired to model the privatization plan for the gas company, he said.

Among the options is a traditional initial public offering, said Heber Resende, the chief executive of ES Gas. He added, however, that it was more likely the stake would be sold off to a single investor or group of investors.

Among the buyers he sees as likely to be interested in the asset are pension or infrastructure funds looking for long-term, low-risk returns. They would likely be associated with firms with operating experience in the gas distribution sector, he said.

The sale is part of a plan to revitalize the economy of Espirito Santo, an oil producer with royalty money of 350 million reais ($65.7 million) stashed in the state’s sovereign fund.

It also comes amid a wider government push to bring new investors into Brazil’s gas distribution sector, traditionally dominated by state governments and state oil company Petroleo Brasileiro SA.

Casagrande said he will announce on Thursday plans to attract businesses to his state with subsidized credit, fiscal incentives and a reduction of the inter-state goods tax ICMS. (Reporting by Anthony Boadle; Editing by Tom Brown and Richard Pullin)