State of Rio Grande do Sul: On October 21 1997, Companhia Estadual de Energia Elétrica sold two of its three distribution networks for R3.145 billion (US$2.85 billion). The premiums over the minimum asking prices were 82.62% for the Centre-West distributor and 93.55% for the North-Northeast distributor.
The Centre-West distributor was acquired by the North-American group AES Corporation. The North-Northeast distributor was acquired by the consortium formed by VBC Energy (composed of the Brazilian groups Votorantim, Bradesco and Camargo Corrêa), Previ (a Brazilian pension fund) and Community Energy Alternative of the US, each with a participation of 33.3%.
State of São Paulo: On November 5 1997, Companhia Paulista de Força e Luz (CPFL), a distribution network, was sold for R3.015 billion, a premium of 70.15% over the minimum asking price.
The winning group had to guarantee, at the same premium, the sale of a 10% participation to employees. Thus, the total price on November 27 1997 was increased to R3.536 billion. This is the highest price so far obtained in the history of Brazilian privatizations.
CPFL has been acquired by a consortium formed by VBC Energy (42%), Previ (38%) and a pool of seven pension funds lead by Fundação Cesp (20%).
The sale of CPFL launches the privatization of the energy sector of the state of São Paulo, which itself is larger than the whole of the Argentinian energy network. Other energy companies to be privatized in São Paulo in 1998 include Electropaulo, Comgás and Cesp (Companhia Energética de São Paulo), which used to be the controlling shareholder of CPFL.
Also, the sale of CPFL was the first test of the privatization programme after the recent turmoil affecting world financial markets. The premium (70.15%) surprised not only the government, but also market analysts.
On November 11 1997, to restore confidence in the Brazilian economy and neutralize the pressures exerted by the recent turbulence in financial markets, the federal government announced a financial package containing tough tax increases and budget cuts.
Eliana Maria Filipozzi
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