Brazil utility Rede Energia files for bankruptcy protection

• Business »

Quotes

 

Cpfl Energia SA

CPFE3.SA

R$ 22.80

+0.57+2.56%

11/23/2012

 

Equatorial Energia SA

EQTL3.SA

R$ 17.45

+0.05+0.29%

11/23/2012

RIO DE JANEIRO | Fri Nov 23, 2012 11:35pm GMT

(Reuters) - Brazilian electricity distribution utility group Rede Energia SA (REDE3.SA) on Friday filed for bankruptcy protection with a court in Sao Paulo, the company said in a filing to securities regulators.
Rede Energia, which operates eight power distributors, said in a statement its financial situation had deteriorated and restructuring under Brazilian bankruptcy laws was the best way to protect creditors rights. Most of its utility investments were put under government administration in August.
"The request for court-sponsored bankruptcy protection became inevitable in the face of a worsening economic and financial crisis at the company," the statement said.

The filing comes as Brazil's electric utility industry faces one of its most serious downturns in more than a decade. Small distributors, such as those owned by Rede Energia, have found it hard to collect enough revenue in poor and often remote regions to pay for government-set expansion and improvement of service targets.

Meanwhile, electricity generators' share prices have plunged in the face of government plans to offer early renewal of expiring hydroelectric dam concessions in exchange for power tariff cuts of 20 percent or more. Many expect the tariff cuts to slash utilities' revenues, profits and investments.
Brazil's IEE index .IEE of the most-traded electrical utility stocks on the Sao Paulo BM&FBovespa Exchange has lost more than a quarter of its value since mid-August.
In October, Rede Energia said it signed an agreement for the possible sale of the company to Brazilian utilities CPFL Energia SA (CPFE3.SA) and Equatorial Energia (EQTL3.SA).
Energy companies Energisa SA (ENGI4.SA) and Copel (CPLE6.SA) last month said they were interested in buying Rede Energia.
The request was also made on behalf of operating units CTCE-Cia Technica de Comercializacao de Energia, QMRA Participacoes SA, EEVP-Empresa de Eletricidade Vale de Paranapanema SA and Denerge Desenvolvimento Energetico SA.
Rede Energia preferred shares (REDE4.SA) last traded on November 16 when they closed at 3.79 reais in Sao Paulo.
(Reporting by Jeb Blount, editing by G Crosse) COPY http://uk.reuters.com