Privatization at Hand for State Bank, Power Company

Article excerpt

Privatization is moving ahead in Brazil at full speed in a number of industries, and Pernambuco is participating in this trend with plans to sell a state-owned bank and electrical energy distribution company.

"The power distribution company, Celpe, is our most valuable asset," says Eduardo Campos, Pernambuco's secretary of finance. "It is the secondlargest distribution company in Brazil. The state legislature is discussing how to sell 40% of Celpe immediately, either through the sale of shares on the stock exchange or an auction conducted by the National Economic and Social Development Bank (BNDES)." Pernambuco expects to derive at least $1.6 billion from the sale.

With strong interest from foreign and domestic investors in other power privatizations around the country resulting in premium prices for state assets, says Campos, the timing for Pernambuco's sale is good. "Whether or not we sell the rest of Celpe depends on other technical and political factors," he says. "Our own resources of hydroelectric energy are sufficient through the year 2005, but after that we may have to import electricity from other states in the Northeast. We have to make sure that Pernambuco continues to develop the electricity it needs to bring in new industrial investment."

Currently, Celpe distributes power only in Pernambuco, but as Brazil's electrical industry is deregulated it will be able to operate on a regional basis in other states.

The other major asset marked for privatization is Bandepe, Pernambuco's state bank. "We are restructuring the bank to 'sanitize' it," Campos says. "We want to avoid the mistakes that some other states have committed, like leaving the question of pension obligations to employees unresolved. …