(Wraps Germany and Brazil stories; adds details on transaction, executive quotes, share reaction; changes dateline)
By Asher Levine and Christoph Steitz
SAO PAULO/FRANKFURT, May 12 (Reuters) - Brazilian electric utility Eneva SA will increase its capital by up to 1.5 billion reais ($678.7 million), according to a securities filing on Monday, as part of its effort to reduce a heavy debt load.
Eneva, formerly known as MPX Energia SA, is controlled by E.ON SE, Germany’s largest utility, and Brazilian investor Eike Batista.
The first phase of the transaction will involve a capital increase of up to 316.5 million reais, the filing said. E.ON will buy up to 120 million reais worth of new Eneva shares priced at 1.27 reais each.
The second phase includes a capital increase of up to 1.5 billion reais, minus the amount raised in the first phase, at a share price that has yet to be determined. In that round, E.ON will buy up to 450 million reais of new shares, the filing said.
Eneva will also start looking for buyers for between 50 percent and 100 percent of its Pecem II thermoelectric plant, the filing said. Should no buyer come forward, E.ON will purchase the plant and contribute that amount back into the capital increase.
Local banks that provide financing to Eneva will also give the company a $100 million reais bridge loan, the filing added.
Shares of Eneva jumped nearly 15 percent in afternoon trading in Sao Paulo, while E.ON was up about 1 percent in Frankfurt.
The transaction will allow Eneva to focus on improving operations and growing, Chief Executive Officer Fabio Bicudo said on a conference call with analysts on Monday.
Bicudo said the company would begin a cost-cutting program in coming months, reducing annual operational expenses by 52 percent to about 80 million reais by the end of this year.
Investors have started to voice concern over E.ON’s pricey foray into Brazil after the business empire of partner Batista started to crumble and the Brazilian economy slowed down. This has caused E.ON to increase its stake in Eneva several times, swallowing 1.3 billion euros in investments while not making any money from them so far.
Under the deal, E.ON’s total ownership of Eneva shall not surpass 49.9 percent, the filing said.
E.ON does not break out earnings figures for Brazil, but it posted a loss of 154 million euros before interest, tax, depreciation and amortization in that country and Turkey for last year, after a 11 million loss in 2012.
$1 = 2.21 Brazilian reais Additional reporting by Marcela Ayres; Editing by Sofina Mirza-Reid and Lisa Von Ahn