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Exclusive: Brazil's Cemig to cut Light stake by more than half - source
March 16, 2017 / 3:52 PM / in 9 months

Exclusive: Brazil's Cemig to cut Light stake by more than half - source

SAO PAULO (Reuters) - Cia Energética de Minas Gerais SA (CMIG4.SA) plans to sell more than half the 52 percent stake it holds in electricity company Light Energia SA (LIGT3.SA), the latest in a series of planned asset sales aimed at helping Brazil’s No. 3 power utility reduce debt, a person with direct knowledge of the plan said on Thursday.

The source said Cemig would sell 11 percent of the 26 percent direct participation it holds in Light’s capital in the market within 60 days, leaving it with a 15 percent direct stake. Cemig will keep about a third of the 26 percent indirect stake it has in Light and put the rest up for sale, the person added.

Assuming Cemig will keep about 24 percent of Light and based on a price of 25 reais per share, the deal could raise about 3.6 billion reais ($1.2 billion) for Cemig, the source said. Shares of Light were down 2.8 percent at 21.00 reais on Thursday afternoon.

Brazil-based Cemig and Rio de Janeiro-based Light did not have an immediate comment. Efforts to reach representatives for Minas governor Fernando Pimentel were not immediately successful.

State-controlled Cemig is quickly exiting some business segments and trying to turn around core business such as power generation, renewable energy and transmission. The group’s debt has tripled since 2012, following a spree of takeovers that failed to yield the expected returns and in part because of a government-led power contract renegotiation that same year.

The decision comes less than a week after Reuters reported that Cemig is also working on a plan to sell a majority stake in power generation and transmission company Cemig GT and power distribution firm Cemig D, and then list the units in São Paulo and New York this year. Cemig is controlled by Brazil’s Minas Gerais state, which signed off on the plan last week.

With the move on Light, Cemig would end a shareholder accord that controls that company and take a step toward making its ownership more dispersed, said the person, who spoke on condition of anonymity because the plans are private. Light’s controlling bloc includes Cemig, conglomerate Andrade Gutiérrez (CANT4B.SO) SA and investment vehicles Luce Participações SA and RME Rio Minas Energia.

Proceeds from the sale of Light stock will be used to reduce Cemig’s 13.7 billion-real debt burden, the person said.

Banks including Grupo BTG Pactual SA BBTG11.SA, JPMorgan Chase & Co (JPM.N), Banco Santander Brasil SA (SANB11.SA) and Citigroup Inc (C.N) are in talks to oversee the transaction, which should be concluded by the end of June, the person said.

    The investment-banking units of Itaú Unibanco Holding SA and state-controlled Banco do Brasil SA, Brazil’s top two banks by assets, are also participating in the talks, the person noted.

    The banks did not have an immediate comment.

    Pimentel’s decision to partially exit Light and surrender control of Cemig GT and Cemig D adds to a flurry of merger and acquisition deals in Brazil’s electricity industry over the past year. The largest was State Grid Corp of China’s $21 billion purchase of CPFL Energia SA (CPFE3.SA) last year.

    Cemig remains active on that front, disposing of assets it considers nonessential or too problematic to run, while finding partners for some debt-laden subsidiaries like renewable power firm Renova Energia SA (RNEW11.SA).

    Reuters reported on March 1 that a unit of Brookfield Asset Management Inc (BAMa.TO) was close to buying a 30 percent stake in Renova.

    Additional reporting by Luciano Costa de Paula and Tatiana Bautzer in São Paulo; Editing by Lisa Von Ahn and Matthew Lewis

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