Brazil’s Rio Grande do Sul State auctions CEEE-T energy transmission company

RIO DE JANEIRO, BRAZIL – From 11 AM this Friday, July 16, the government of Rio Grande do Sul will auction Companhia Estadual de Transmissão de Energia Elétrica (CEEE-T) energy transmission company. A total of 66% of the company’s shares will be sold for a minimum value of R$1.7 billion (US$332 million). The auction will be held at the B3 stock exchange headquarters, in São Paulo.

The company operates some 6,000 kilometers of transmission lines and 56 substations in the region.

The market expects the asset to be the target of significant competition. In a report, Bank of America (BofA) estimated a premium of up to 40% over the minimum price, which would represent R$2.4 billion for the Rio Grande do Sul government’s stake. BTG calculated an equity value of R$2.31 billion for the State’s stake in the company. Credit Suisse also evaluates that a premium of between 30% and 40% would still yield reasonable returns to the bidder.

Among the potential interested parties, Cteep (Companhia de Transmissão de Energia Elétrica Paulista), CPFL Energia, and Taesa were pointed out – although in the case of the latter, the exit process of its shareholder Cemig could reduce interest.

Other companies that have also been studying the asset are pointed out as potential bidders, such as CPP (Canada Pension Plan), EDP, Energisa and Cymi, analysts said.

Equatorial Energia, which this week took over the Rio Grande do Sul state-owned company’s distribution division – CEEE-D – has ruled out taking part in today’s auction. The bids were delivered on Monday, July 12.

In addition to the Rio Grande do Sul government, Eletrobras holds 32.65% of the company’s shares. After the auction, the state-owned company may exercise its tag-along right to sell its stake under the same terms.

The project to privatize the Rio Grande do Sul power company began in 2019, when the State government passed an amendment to the state Constitution excluding the need for a plebiscite in the event of the sale of the company’s control.

The process is part of a series of privatizations by the Rio Grande do Sul government. In addition to CEEE-D and CEEE-T, the state plans to privatize the Companhia de Gás do Estado do Rio Grande do Sul (Sulgás) and sell its control of the Companhia Riograndense de Saneamento (Corsan), through an initial public offering of shares.

Source: Valor