SAO PAULO – Cia Energética de Minas Gerais SA (Cemig)(CMIG4.SA) has decided to sell its minority stake in Aliança Geração de Energia SA, a Brazilian power generation joint venture with Vale SA (VALE5.SA), in a deal that could raise around 2 billion reais ($590 million), three people familiar with the plan said.
According to the people, power holding company Cemig (CMIG4.SA) would dispose of its 45 percent stake but Vale wants to keep its controlling stake. The investment banking unit of Itaú Unibanco Holding SA (ITUB4.SA) would oversee the process for Cemig.
Vale, the world’s largest iron ore producer, wants to remain in the venture as it allows it to avoid paying higher energy costs. Companies that generate energy and use it for production are exempt from certain taxes in Brazil.
Aliança, which is based in the Brazilian city of Belo Horizonte, owns seven hydropower dams in the mineral-rich state of Minas Gerais and a wind power farm in Brazil’s northeast.
The assets give Aliança, whose annual revenue tops 1 billion reais, total power generation capacity of 1,200 megawatts.
Cemig, controlled by the cash-strapped Brazilian state of Minas Gerais, has been hobbled by tepid power consumption amid a deep recession in Brazil and years of rampant borrowing.
Now the company is shedding assets with weak returns or that require additional investment to cut debt that topped 13 billion reais last quarter.
Cemig wants to shed non-core investments and minority stakes in companies, investor relations director Fabiano Pereira told investors in a teleconference this week.
Reuters reported on Sept. 16 that Cemig is looking for new partners for Light Energia SA.
The media office of Vale declined to comment, as did press representatives for Cemig and Itaú.
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Source: Reuters.com