Government of São Paulo resumes privatisation of CESP
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The government of São Paulo has resumed the partial privatisation of Companhia Energetica de São Paulo (CESP), the utility company responsible for approximately 58% of the energy generated in the state, and for almost 12% of the total power produced in Brazil, making it the third largest in the country.
The government first announced that it was considering selling its 40.6% share in the company in July 2016. This caused the biggest intraday rise in the company's share price since October 2008. Plans were formalised, and in July 2017, officials and advisors were sent to China, Europe and North America to market the sale to potential investors. In August it was announced that the government's stake would be auctioned on 28 September 2017.
However, a few days before the scheduled auction, the sale was suspended. Although no explanation was given, it is thought that it was motivated by Brazilian President Michel Temer's announcement of a privatisation package of reforms in August 2017, in attempt to reverse the country’s economic stagnation. The electricity sector was labelled as a target.
The resumption of the privatisation of CESP follows the signing of a decree by Rodrigo Maia, Brazil's acting president while Michel Temer attends the World Economic Forum in Davos, Switzerland, within this package, with the specific aim of facilitating the privatisation of generation plants owned by state-run electric power companies.
The decree grants 30-year concession contracts to private groups taking over state-run companies for the running of the companies' power plants.
This means that the successful buyer of the government shares in CESP will gain a 30-year concession contract for the company's 1,540 MW Porto Primavera hydro project. This strengthens the CESP's position and increases the chances of a private sale, causing the government to resume the sale process.
CESP has installed generating capacity of 7,455 MW, including three hydroelectric dams with a combined capacity of 1.65 GW.
