Brazilian state to seek privatization of power firm Copel, shares soar

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SAO PAULO — The Brazilian state of Parana intends to turn local power company Copel into a firm with dispersed ownership and no controlling shareholder, a move that would in practice privatize the state-run utility by making it a corporation, a document showed on Monday.

Shares in the company surged more than 25% in morning trading, making it the top gainer on Brazil’s Bovespa benchmark stock index, which was near flat.

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Companhia Paranaense de Energia, as Copel is formally known, said that recently re-elected Governor Ratinho Junior sent a letter to the company saying his administration would seek to privatize it through a secondary follow-on share offering aimed at raising money for the state’s investment needs.

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The move would mark yet another high profile privatization in Brazil’s power sector after the federal government diluted its stake in Eletrobras, Latin America’s largest utility, earlier this year.

Copel noted in a securities filing that a potential privatization would still require approval from Parana’s state legislature, adding that Ratinho Junior said he would propose a bill “in due time” for legislators to vote on the matter.

Under the move, Parana would retain at least 15% of Copel’s share capital and 10% of its voting capital, the company added, while noting that no shareholder would be able to hold more than 10% of its voting capital.

The Southern Brazilian state currently owns nearly 70% of Copel’s voting capital.

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“We see the move as extremely positive for Copel’s shares,” said Ilan Arbetman, an analyst at Ativa Investimentos, while acknowledging the legislative and legal steps required for the transaction to be completed.

“It has a strong potential to unlock value for the company’s shares.”

Shares of Sanepar, Parana’s state-controlled water utility, also jumped 12% on Monday.

The proposal came just over a month after Ratinho Junior was re-elected governor in an outright win with almost 70% of votes.

Investors had already been envisioning a privatization after the election results and as Parana requested information “to analyze a potential capital markets transaction aimed at optimizing its investment in the firm.” (Reporting by Gabriel Araujo and Leticia Fucuchima; Editing by Steven Grattan and Emelia Sithole-Matarise)