(Adds details of planned divestment, hydropower dam proposal,
Light declining to comment)
By Guillermo Parra-Bernal
SAO PAULO, March 23 Cia Energética de Minas
Gerais SA plans to sell a bigger stake than initially
planned in subsidiary Light Energia SA, which wants
to speed up the process to help reduce its debt, a person with
direct knowledge of the plan said on Thursday.
According to the source, the company, known as Cemig, plans
to sell about 36 percent of Light at an auction instead of the
roughly 27 percent initially considered. Cemig currently has a
26 percent direct stake in Light, plus another 26 percent held
indirectly through an investment vehicle.
Assuming Cemig keeps 16 percent of Light and based on a
price of 25 reais per share, the deal could raise about 4.4
billion reais ($1.4 billion), the source said. About 70 percent
of proceeds would go toward reducing Cemig's debt of 13.7
billion reais, with Light getting the rest, said the source, who
did not elaborate on the structure of the sale.
Cemig, which is Brazil's No. 3 power utility and is
controlled by the state of Minas Gerais, is exiting some
business segments and trying to turn around core operations such
as power generation, renewable energy and transmission. Its debt
has tripled since 2012, following a series of takeovers that
failed to yield expected returns due in part to government-led
renegotiations of power contracts.
Reuters reported on March 16 that Cemig was considering the
Light stake sale as well as selling majority stakes in power
generation and transmission company Cemig GT and power
distributor Cemig D. The moves would involve the engagement of
partners and then a listing of Cemig GT and Cemig D in São Paulo
and New York as early as this year.
According to the source, Light Chief Executive Officer Ana
Marta Horta Veloso wants Cemig to accelerate the stake sale,
which could take place within weeks. Cemig has hired the
investment banking units of Itaú Unibanco Holding SA
and Banco do Brasil SA to work on the plan, the
Media representatives for Rio de Janeiro-based Light
directed questions to Cemig, which did not immediately respond
to requests for comment.
Itaú and Banco do Brasil did not have immediate comments.
Last week, Reuters reported Grupo BTG Pactual SA
, JPMorgan Chase & Co and Citigroup Inc
were vying for slots in the underwriting group. The banks
declined to comment.
The stake sale would end Light's controlling shareholder
accord, said the source, who spoke on condition of anonymity
because the plans are private.
That would create a more dispersed ownership structure and
improve corporate governance, offering a premium to Cemig's
current share price, the source said, adding that 25 reais was
not necessarily an indication of how the offering would price.
Light's controlling bloc includes Cemig, engineering
conglomerate Andrade Gutiérrez SA and investment
vehicles Luce Participações SA and RME Rio Minas Energia.
Shares of Light slipped 1.7 percent to 20.28 reais in midday
trading, while Cemig rose 3.3 percent to 10.15 reais.
Minas Gerais and Cemig also plan to ask the federal
government to renew contracts for operating hydropower dams that
expired in recent years in exchange for a reduction in debt that
the federal government owes to the state for non-payment of
export tax exemptions, the person said.
Brazilian Deputy Energy Minister Paulo Pedrosa said on
Tuesday that the federal government would take back all Cemig
power dams whose licenses expired in recent years, having failed
to reach a deal with the company to extend them.
Efforts to reach officials at Minas Gerais state for comment
were not immediately unsuccessful.
($1 = 3.13 reais)
(Reporting by Guillermo Parra-Bernal; Additional reporting by
Brad Haynes; Editing by Bernadette Baum and Lisa Von Ahn)