May 3, 2018 / 11:14 PM / a year ago

UPDATE 1-Brazil's CPFL eyes Eletrobras distributors on sale -sources

(Adds details on coveted distributors, source quotes)

SAO PAULO/RIO DE JANEIRO, May 3 (Reuters) - Brazil’s CPFL Energia SA is eyeing distribution assets being sold off by state-run utility Centrais Elétricas Brasileiras SA , three sources with knowledge of the matter said on Thursday.

The money-losing assets could eventually turn a profit if run by owners willing to invest in them, said the sources on condition of anonymity to discuss the confidential matter.

CPFL, owned by China State Grid Corp, is particularly interested in Cepisa and Ceal, which operate in the northeastern states of Piauí and Alagoas, respectively, one person said.

Another source said CPFL executives had visited Cepisa.

The plan suggests CPFL’s attention turned to the auction of the Eletrobras distributors after the company dropped out of a bidding war to control Eletropaulo Metropolitana de São Paulo SA , Brazil’s largest distribution company by sales.

CPFL, Brazil’s largest private-sector electricity group, was put off after two rivals raised their bids for Eletropaulo, making it too expensive, the sources said.

“CPFL was eager to buy Eletropaulo, but the competition with Enel and Neoenergia increased the price tag to a level that cannot be justified,” one of the sources said.

Last month Italy’s Enel SpA raised its takeover offer for Eletropaulo, as the São Paulo-based utility is known, to 32.20 reais per share. The bid valued Eletropaulo at 5.39 billion reais ($1.53 billion), and topped one by Neoenergia SA, controlled by Spain’s Iberdrola SA, of 32.10 reais per share.

The government is expected to auction off six Eletrobras distribution companies in the north and northeast of Brazil by June.

The auction has been postponed from this month because of an ongoing federal audit court analysis of the bidding rules. ($1 = 3.5282 reais) (Reporting by Luciano Costa in São Paulo and Rodrigo Viga Gaier in Rio de Janeiro; Writing by Ana Mano; Editing by Richard Chang)

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