August 2, 2016 / 10:02 PM / 2 years ago

Debt, high price threaten Celg-D privatization auction

SAO PAULO, Aug 2 (Reuters) - Investors eyeing Brazil’s auction to privatize state-owned utility Celg-D said its heavy debt and the high minimum price could jeopardize the Aug. 19 sale.

Celg-D, which serves the agricultural-rich center-west state of Goiás, is the first power distributor to be sold by Eletrobras, as holding company Centrais Elétricas Brasileiras SA is known. Eletrobras plans to sell all its seven distributors by the end of 2017 as it tries to get rid of money-losing businesses.

The mininum price set for Celg-D is 2.8 billion reais ($859 million). The final price could reach 5.2 billion reais if the company’s debt is considered.

Investors said this week that might be too much, even after regulatory changes by Brazil’s interim President Michel Temer have improved the sector’s outlook.

“Investors are complaining,” said one source close to the privatization process who was not authorized to publicly discuss the matter.

Thais Prandini, a director at consultancy Thymos Energy, said credit restrictions during Brazil’s sharpest recession in eight decades may also limit interest.

Investors seeking to enter energy distribution in Brazil have other options. Utility Companhia Energética de Minas Gerais , for instance, is looking for a partner in its Rio de Janeiro-based utility Light Energia SA.

Chinese investors again seem to be the best hope.

China’s State Grid Corp on July 1 clinched one of the largest deals yet in the Brazilian energy sector, buying from construction conglomerate Grupo Camargo Correa a controlling stake in utility CPFL Energia SA

State Grid responded to Reuters in a statement that it had yet to decide if it would take part in the Celg-D auction.

Energisa SA, another large utility holding company in Brazil, said it would not bid because of the high minimum price. Neoenergia SA is not interested either, a company source said, declining to be identified because the decision was private.

AES Corp also responded in a statement that it would not participate in the auction. ($1 = 3.2583 Brazilian reais)

Reporting by Luciano Costa; Writing by Tatiana Bautzer; Editing by Richard Chang

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