SAO PAULO, Aug 28 (Reuters) - China's State Power Investment Corp plans to participate in the auction of four hydroelectric dams whose licensing was seized from Cia Energética de Minas Gerais SA in recent months, a person with direct knowledge of the situation said on Monday.
The Chinese company, known as SPIC, has arranged the help of two unnamed investment banks to structure a proposal for the Miranda, São Simão, Jaguara and Volta Grande dams, said the person, who was not authorized to publicly discuss the matter and requested anonymity.
Faced with a wider-than-expected budget deficit this year and struggling with sluggish tax collections, the federal government expects the auction to raise up to 11 billion reais ($3.5 billion). The four dams, in the states of São Paulo and Minas Gerais, have a combined generation capacity of 2.9 gigawatts.
Pacific Hydro Brasil, SPIC's Brazilian subsidiary, and Brazil's electricity industry watchdog Aneel, which is overseeing the auction, declined to comment.
SPIC will face other competing bids, mainly from European utilities, at the Sep. 22 auction. Reuters reported last week that Italy's Enel SpA was considering bidding for the dams, alongside France's Engie SA.
The auction of the four dams has been marred by legal disputes with Cemig, which operated them for years but lost renewal of their licenses in the wake of a 2012 federal government decision to renegotiate power contracts.
Cemig, which is controlled by the Brazilian state of Minas Gerais, recently won an injunction to stop the auction. It is operating the dams on an acting basis.
$1 = 3.1604 reais Editing by Guillermo Parra-Bernal and Richard Chang