SAO PAULO/BRASILIA (Reuters) - A unit of China’s Shanghai Electric Group Co Ltd 601627.SS is near closing a deal to take over a power transmission project in southern Brazil owned by a subsidiary of Eletrobras (ELET6.SA), an official at electricity regulator Aneel told Reuters.
The project in Rio Grande do Sul state requires roughly 3.3 billion reais ($1.0 billion) in investment and had originally been awarded to the Eletrobras unit Eletrosul Centrais Eletricas SA, or Eletrosul.
Closure of the deal depends on Shanghai Electric accepting conditions imposed by Aneel, said Director José Jurhosa, who heads the agency’s unit overseeing the case.
“They made a proposal and we’re analysing it ... point by point. We agree with some, not with others,” Jurhosa said. “It will depend whether they accept what we are imposing.”
State-controlled Eletrobras, Eletrosul and Shanghai Electric did not immediately respond to requests for comment.
Eletrobras, or Centrais Eletricas Brasileiras SA, said in a securities filing in June that the companies had reached a non-binding agreement.
Aneel is set to review Eletrosul’s request to allow the takeover at a meeting of the regulator’s board of directors on Tuesday.
Jurhosa said he will suggest at the meeting that the other directors conditionally approve the deal because the transmission lines in question are key to the electrical grid and any re-bidding for contracts could delay their completion.
According to a person with knowledge of the matter, representatives of Shanghai Electric have planned a trip to Brazil to sign a binding memorandum of understanding for its unit Shanghai Electric Power Transmission and Distribution Engineering to take control of the project.
A second source close to the deal said the negotiations indicated the deal provides that Shanghai Electric will transfer a roughly 25 percent stake in the projects to Eletrosul in the future.
The China-controlled CLAI fund is also expected to take a 25 percent to 35 percent stake in the project, the source said.
The deal follows a spree of Chinese acquisitions in the Brazilian power sector. State Grid Corp of China has become Brazil’s second largest electricity transmission company while China Three Gorges Corp is the country’s No. 2 private power generation firm, according to China’s embassy in Brasilia.
Reporting by Luciano Costa and Jake Spring; Editing by Leslie Adler