September 27, 2017 / 2:18 PM / 5 months ago

Brazil sells dam operating licenses for $3.8 billion to foreign bidders

SAO PAULO (Reuters) - Brazil’s government on Wednesday sold licenses to operate four hydroelectric dams for a total of 12.12 billion reais ($3.80 billion) in an auction won by Chinese and European bidders.

The amount raised is 10.1 percent above the 11 billion reais minimum asking price the government had set.

China’s State Power Investment Corp [CPWRI.UL] will pay 7.18 billion reais to operate the São Simão hydropower plant, the biggest of the four assets auctioned.

In a statement, the company said it will continue looking for acquisition targets in Brazil, adding it favors investments in hydroelectric and wind power projects.

France’s Engie SA acquired the licenses to operate the Jaguara and Miranda dams for a combined sum of 3.53 billion reais.

People protest during Brazilian government auction of operating licenses for four hydroelectric plants in Sao Paulo, Brazil September 27, 2017. Banner reads: "Privatisation is thief's thing, if Michel Temer sells CEMIG's mills, the electricity bill will rise for the population." REUTERS/Paulo Whitaker

Gustavo Labanca, a senior Engie executive, said the company may sell debentures or commercial paper in Brazil to fund payment of the licenses.

Italy’s Enel Spa won the bid for Volta Grande dam for 1.41 billion reais.

France's Engie SA representatives react during Brazilian government auction of operating licenses for four hydroelectric plants in Sao Paulo, Brazil September 27, 2017. REUTERS/Paulo Whitaker

Brazil’s government was pleased with the result of the auction, which was in line with expectations, Planning Minister Dyogo Oliveira said on Twitter.

Depending on the dam, the bidders paid between 6.5 percent and around 22.5 percent above the government’s minimum price.

The auction results signal strong investor appetite in the privatization program of President Michel Temer, who is trying to raise money to cut Brazil’s budget deficit.

Companhia Energética de Minas Gerais previously operated all four dams. Shares of Cemig, as the company is known, fell 1.6 percent to 7.92 reais in early afternoon trading.

Reporting by Luciano Costa; Writing by Ana Mano; Editing by W Simon

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