* EDP holding 4 bln euros in cash, other liquid assets
* Would return to capital mkts “as soon as it makes sense”
* Sale of govt stake to boost EDP’s financial strength
By Walter Brandimarte
Nov 15 (Reuters) - Portuguese utility Energias de Portugal, or EDP (EDP.LS), has raised enough funding to meet its obligations without tapping capital markets for the next two years, just in case the euro zone debt crisis forces it to do so, Chief Executive Antonio Mexia said.
The planned sale of a 21 percent government stake in EDP to a foreign investor will be another opportunity for the company to strengthen its financial position, he said.
“Currently at EDP we are prefinanced two years in advance,” Mexia told Reuters in an interview last week in New York, adding that the company has raised 3.3 billion euros in new funding during the first nine months of the year.
“Of course we would like to go back to the bond market as soon as it makes sense to come back,” he said.
EDP’s borrowing costs have jumped in the past few months as Portugal was engulfed in the euro-zone debt crisis. EDP’s five-year credit-default swaps (CDS), used to insure the company’s debt against the risk of default, have roughly tripled from an April low.
“The CDS market shows our risk perception has changed because of the Portuguese and European effect,” Mexia said, arguing that EDP has “suffered more than it should” because markets have overlooked the fact that more than 60 percent of its cash flow originates outside Portugal.
EDP has operations in Brazil and Spain, as well as financial stakes in companies that operate in Guatemala, Cape Verde and Macau.
EDP’s financial strength will get a boost, Mexia said, when the government sells its stake at the company to one of the four bidders that made a short list last week: Germany’s E.ON (EONGn.DE), China’s Three Gorges Corp or two Brazilian companies, state-run power holding company Eletrobras (ELET6.SA) and Cemig (CMIG4.SA), controlled by the state of Minas Gerais.
“All of those players, one way or another, bring enhancement in terms of growth options, new market opportunities, or additional financial strength,” Mexia said.
Asked to be more specific about the strengths of each of the suitors, he said Three Gorges has a “strong balance sheet and financial backup,” while E.ON has a better credit rating.
“In what concerns the Brazilians, we’re talking about at least one case of a very strong company with full support of financial institutions,” Mexia said, referring to Eletrobras, which might tap financing from Brazil’s national development bank, or BNDES, to bid for EDP.
“So, clearly, because of (higher credit) rating or financial backups, those bidders represent additional muscle for the company.”
Portugal’s government has pledged to sell its 21 percent in EDP by the end of the year to comply with the terms of a bailout package agreed with the European Union and the International Monetary Fund. The stake in the country’s biggest company is worth around 1.8 billion euros at current prices. (Reporting by Walter Brandimarte; Editing by Tim Dobbyn)