China State Grid says won’t bid for Brazil’s Rede

The State Grid Corp of China will not bid for a controlling stake in Brazilian power distribution company Rede Energia, a company official confirmed on Thursday.

State Grid’s decision leaves other contenders, such as CPFL Energia, in a better position to win the 54 percent stake that is being sold by Jorge Queiroz, the main shareholder and chairman of Rede Energia, which has a market capitalization of about $1.1 billion.

“State Grid did look at the project, but because the regulatory policies on power distribution there are not very advantageous, State Grid is not doing that project now,” a person with direct knowledge of the deal told Reuters, speaking on condition of anonymity because the details are confidential.

A company media official later confirmed that State Grid would not bid on the project.

Queiroz is pressing for the sale to help lower company debt, which a source told Reuters had risen to as high as 6 billion reais ($3.4 billion) in recent months. Rede Energia distributes electricity to approximately 34 percent of Brazil, crossing seven states.

Although China’s dominant power distributor has decided not to bid on Rede, State Grid remains active in Brazil, where in 2010 it successfully purchased seven Brazilian power transmission companies with a total value of nearly $1 billion.

State Grid remains interested in expanding its presence in Brazil’s power sector, the source said.

State Grid had earlier been mentioned, along with CPFL Energia and Brookfield Energia Renovavel, as being among the companies interested in the stake. The bidding process could stretch until March, another source had said.

AES Corp, one of Brazil’s biggest distribution companies in number of consumers, earlier abandoned plans to buy Rede Energia.

Earlier this year, Portugal’s government agreed to sell a 25 percent stake valued at about 387 million euros ($505.65 million) in power grid operator REN to China’s State Grid.