December 10, 2018 / 8:43 PM / a year ago

Brazil's Eletrobras sells unit at auction, assumes $3.3 billion debt

FILE PHOTO: A view of the headquarters of Brazil's power company Eletrobras in downtown Rio de Janeiro August 20, 2014. REUTERS/Pilar Olivares/File Photo

SAO PAULO (Reuters) - Brazilian state-controlled power company Eletrobras on Monday sold its power distribution subsidiary Amazonas Energia at an auction, but said it will assume 13 billion reais ($3.33 billion) in debt before passing it on to the new owner.

Brazilian consortium Oliveira Energia-Atem, who had already bought another power distribution company from Eletrobras in a previous auction, was the sole bidder and winner at the auction. It paid a symbolic amount of 50,000 reais and will assume 2.2 billion reais in debt.

The auction’s result, however, could not be validated yet because a Brazilian judge decided to suspend the process until a labor court rules on a request by a union representing Amazonas Energia workers.

The union said that studies regarding the impact of the privatization on the company’s employees should have been made before the auction.

Eletrobras CEO Wilson Ferreira Jr said after the auction at Sao Paulo’s B3 exchange that the company will appeal the ruling. Eletrobras sees the sale as part of a broader divestment program that seeks to dispose of non-core assets and cut debt.

Eletrobras, or Centrais Elétricas Brasileiras SA (ELET6.SA), is Brazil’s largest power group. The government had plans to sell its controlling stake in the conglomerate, but necessary legislation to allow the operation was never approved.

Brazil will have a new federal administration starting on Jan. 1. Right-wing president-elect Jair Bolsonaro has advocated boosting privatizations.

Reporting by Luciano Costa and Marcelo Teixeira; editing by Grant McCool

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