Brazil Remains Committed To Next Week's
Privatizations
By MARY MILLIKEN
Dow Jones Newswires
SAO PAULO -- Neither the two-year lows in the stock market nor hefty
capital outflows are enough to keep Brazil's authorities from privatizing
assets worth at least $2 billion next week.
The state governments of Minas Gerais and Sao Paulo and the federal
government all say their auctions for a bank, an electricity distributor and a
power generator will take place on the scheduled days.
Not only do the governments need the revenue to pay debt, but the
country also needs the credibility that successful privatizations can
generate, analysts say.
"I think that now more than ever, they need to show their commitment to
the privatization process," said Kevin Beck, analyst for Robert Fleming in
Sao Paulo.
Next week marks the first major privatizations since the government sold
on July 29 the 12 units of Telecomunicacoes Brasileiras SA, or Telebras,
for $18.85 billion.
And the fact that these are no minnows on the block makes the message
these privatizations sends to the markets all that more powerful.
The biggest of the three is the Sao Paulo state electricity distribution
company Empresa Bandeirante de Energia, a spinoff of Eletropaulo. The
state government had no bidders for Bandeirante in an auction last April,
when it sold another spin-off, Metropolitana, at the minimum price.
"Barring a catastrophe, we are going ahead with the auction," said Mauro
Arce, secretary of state for energy, in an interview with Dow Jones
Newswires. The auction is scheduled for next Thursday.
Arce said the government is in daily contact with the three companies that
have shown strong interest in Bandeirante - the Brazilian consortium VBC
formed by the Votorantim, Banco Bradesco SA and Camargo Correa,
Electricidade de Portugal (EDP) and Enron Corp of the U.S..
"So far, we've had no drop outs," said Arce.
Even if one or two of the big potential bidders drop out, the government
will press ahead with the sale, Arce said.
Bandeirante is going for a minimum bid price of 1.01 billion reals (BRL)
($1=BRL1.18), the same price set at the failed auction. At the time,
potential bidders like VBC said the price was too high.
"What has changed (since April) is that Bandeirante is the last opportunity
to buy a distribution unit," said Arce. "Whoever wants to expand or enter
the market has to buy Bandeirante."
Bandeirante closes the first stage of electricity privatizations, which
concentrated on selling the big Sao Paulo distributors like CPFL to VBC,
Metropolitana to Light Servicos de Eletricidade SA, and Elektro to Enron.
Now the second phase opens with the privatization of generating
companies, like Centrais Geradoras do Sul do Brasil, which goes on the
block Tuesday in Rio de Janeiro.
Gerasul, a spinoff of Eletrosul, one of the four units of federal holding
Centrais Eletricas Brasileiras SA (Eletrobras), will be sold on Tuesday at a
minimum price of BRL945.7 million. The auction was set back from Sept.
1 due to a delay in contract signing between the company and distributors.
The National Development Bank (BNDES), the federal privatization
program supervisor, at first said it wasn't going to give any financing to the
buyer because it thought the level of interest was so high that it wasn't
needed.
But on Wednesday, BNDES softened its position and promised to finance
up to 40% of Gerasul's minimum price to ensure a competitive auction.
Thirty-two companies are pre-registered for the auction, including
Electricite de France, El Paso Energy of the U.S. and Spain's Endesa SA.
Brazil opens the privatization-packed week with the sale of the state bank
of Minas Gerais, Banco do Estado de Minas Gerais, known as Bemge. It
will be sold Monday, Sept. 14 at a minimum bid price of 346.2 million
reals (BRL) ($1=BRL1.17).
"Our expectations continue to be very high," said Alvaro Cunha,
spokesman for the Minas Gerais finance ministry.
Of the six banks pre-registered, two have already said they aren't
interested in bidding - ABN Amro NV of the Netherlands and Spain's
Banco Bilbao Vizcaya SA.
That leaves Banco Bradesco SA, Banco Itau SA and Banco Bozano,
Simonsen all of Brazil, along with Spain's Banco Santander SA. They will
have until Friday night to deposit the financial guarantees to participate in
Monday's auction.
-By Mary Milliken; 55-11-813-1988; mmilliken@ap.org |
