(Adds analyst comment in fifth paragraph.)
Jan. 19 (Bloomberg) -- Sao Paulo state may sell its 36 percent stake in Cia Energetica de Sao Paulo, Brazil’s second- biggest utility by market value, after a tussle over licenses is resolved, Chief Executive Officer Mauro Arce said.
The company, known as Cesp, is pressing the federal government to extend concessions on 67 percent of its generating assets, which expire in 2015, Arce said in an interview in Madrid today.
“Once that’s resolved, we can think about it,” he said. “Just now, all our effort is trying to have a modification of the law that can permit an extension of the concession period.”
Sao Paulo’s state government unsuccessfully tried to sell its stake in Cesp three times since 2000. The last attempt was in 2008, when it canceled an auction after failing to attract bidders because the federal government didn’t ensure it would renew Cesp’s licenses.
“Arce’s comments bring hope that negotiations are going on,” Marco Saravalle, an equity analyst at Coinvalores Corretora de Valores who has a “hold” recommendation on the stock, said in a telephone interview from Sao Paulo. “You get the impression that the licenses will be renewed.”
Cesp fell 1.4 percent to 33.02 reais at 3:30 p.m. in Sao Paulo trading, after climbing earlier on the news to 34.33 reais, the highest since Dec. 23. Brazil’s benchmark Bovespa stock index rose 0.5 percent.
The utility, based in the state’s namesake capital, has power generation capacity of 7,455 megawatts, about 7 percent of the country’s output, according to information on its website. It operates seven hydroelectric plants.
Cesp and government-run Centrais Eletricas Brasileiras SA, Latin America’s largest power company by market value, and Cia Energetica de Minas Gerais have power licenses that will start expiring in 2015.
--Editors: Carlos Caminada, Dale Crofts
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