After 18 Years, Sao Paulo Finally Privatizes Power Utility

(Bloomberg) -- Canadian pension giant CPPIB and the Votorantim group are extending their foray into the South America power market with the acquisition of Sao Paulo power utility Cesp in a long-awaited privatization.

A joint venture between Votorantim Energia and Canada Pension Plan Investment Board presented the winning bid of 1.7 billion reais ($458 million) for a controlling 36 percent stake. Shares in the state-run company rose as much as 17 percent, the most in more than two years.

The Votorantim-CPPIB venture, which bought two wind farms in Brazil’s northeast in December, will spend about 1.4 billion reais for the renewal of Cesp’s hydroelectric plant concession.

"The deal extends our partnership with Votorantim and is evidence of our long-term commitment with Brazil and Latin America," Ricardo Szlejf, head of infrastructure for CPPIB, told reporters after the auction in Sao Paulo Friday.

The winning bid is based on 14.60 reais a share, 2 percent above the minimum price. That offer will be extended to minority holders.

The sale of Cia. Energetica de Sao Paulo, as the utility is formally known, had been planned for at least 18 years, and faced a series of legal obstacles. It still requires regulatory approval.

“We need to focus on what is really essential for the people,” Marcio Franca, the governor of Sao Paulo, told reporters after the auction. “It no longer made sense for Cesp to remain public. It will be better managed by new buyers.”

Votorantim Energia is a unit of Votorantim SA, a Brazilian conglomerate that makes cement, metals, orange juice and wood pulp, according to its website. Its energy unit is Brazil’s third-largest power trader, and the company has been seeking a partner to accelerate its wind-power efforts in the country.

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