July 27, 2017 / 10:04 PM / a year ago

UPDATE 1-Cemig, Odebrecht split on Chinese offer for stake in power project -sources

(Adds comments from sources, context)

By Luciano Costa

SAO PAULO, July 27 (Reuters) - Brazilian power firm Cemig and engineering group Odebrecht are in disagreement on an offer from China’s SPIC to acquire a controlling stake in the Santo Antonio hydropower project where the Brazilian companies are partners, three sources close to the talks said.

Odebrecht is in favor of the sale while Cemig, or Companhia Energética de Minas Gerais SA, believes SPIC’s offer does not reflect a fair value of its stake, the sources said.

The sources declined to state the price offered by SPIC, or State Power Investment Corp, a top five power generator in China.

Chinese companies seeking investments to park an abundance of cash are increasingly turning to Brazilian energy assets at a time when companies like Odebrecht and Petrobras, stricken by the sprawling Lava Jato corruption investigation, are urgently seeking to sell assets to reduce debt levels.

Offer price appears to be a common sticking point, however, with the sale of the Belo Monte dam also stalling out in part over the price offered from China’s Zhejiang Electric Power Construction Co Ltd, Reuters reported earlier this week, citing sources.

In April, Cemig and conglomerate Andrade Gutierrez, another partner in the dam, rejected a first offer from SPIC to pay 8 billion reais ($2.6 billion) and take on 15 billion reais worth of debt.

“There’s difficulty because Odebrecht agreed to sell for a price but Cemig doesn’t want to accept because it paid more for the asset. This creates a certain impasse,” said one of the sources, speaking on condition of anonymity.

The Santo Antônio hydroelectric dam, built for 20 billion reais in the far western state of Rondônia, is one of the largest power stations in Brazil with 3.5 gigawatts of installed capacity.

Other partners in the dam include state-controlled holding company Eletrobras, FIP Caixa Amazônia Energia, and SAAG Investments, a partnership between Andrade Gutierrez and Cemig.

Eletrobras has previously said it is following the negotiations and may join in on a sale, with both Cemig and Eletrobras having announced major divesture plans to cut debt levels.

One source told Reuters that top management at Cemig disagrees on the deal with its partner Andrade Gutierrez. The later holds a 7 percent stake at Cemig.

Chinese deals, having skyrocketed in recent years thanks in part to abundant cheap financing, now face greater scrutiny as officials seek to rein in “irrational” outbound investment in sectors like film and real estate, although deals in strategic areas like infrastructure continue to go forward. (Reporting by Luciano Costa; Writing by Jake Spring; Editing by Bill Trott)

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