UPDATE 2-Brazil denies energy contract renewal by decree

* Brazil gov’t denies planning contract renewals by decree

* Some Brazil utility concessions to expire 2015-2020

* Utilities struggle to raise funds without long contracts

(Recasts with details of renewal process)

SAO PAULO, Jan 29 (BestGrowthStock) – Brazil’s Mines and Energy
minister denied a newspaper report on Friday the government had
drafted a provisional measure to enable concessions for
electricity companies to be renewed by decree.

Folha de Sao Paulo newspaper said on Friday such a measure
was afoot to reduce regulatory uncertainty that had dampened
investments and mergers in the sector and to help utilities
raise funds from banks by showing concrete future plans.

Existing concessions will expire between 2015 and 2020.

The news was behind a 12 percent increase in the share
price of Cesp (CESP6.SA: ) on Friday, one of the companies that
stood to benefit. The share fell steadily later in the day, but
still ended 3.5 percent higher.

Sources contacted by Reuters on Friday said the government
had not reached a decision on how to deal with the renewal of
energy concessions.

A source at the Mines and Energy ministry said a
provisional measure for renewal of the concessions by decree
would be legal, but leave the government wide open to
criticism. A draft law was an alternative, the source said.

Brazil will hold a presidential election in October and
passing new legislation is likely to become more difficult in
the second half of the year when campaigning will be at its
peak in the run-up to the poll.

The government formed a working group more than a year ago
comprised of officials from the Mines and Energy ministry and a
number of state energy agencies to discuss plans for the
renewal of energy concessions.

The group has finished studying various options for the
distribution of the concessions and would make a decision about
new contracts on the basis of that work.

Folha’s article said that, with concession renewal by
decree, the operators would have to agree to lower electricity
tariffs. The rules for companies in energy transmission and
distribution would not be changed, the daily said.

A portion of electricity tariffs in Brazil goes directly to
generators to make up for investments in power plants, but
since the majority of those plants were built several years
ago, companies were less likely to need the funds, Folha said.

The decision to renew the concessions by decree may benefit
in particular three state-run utilities that ran the risk of
having a majority of their assets returned to the federal
government, the daily reported.

Sao Paulo state-run energy generator Cesp has four power
plants with concessions ending in 2015, Folha said, while Cemig
(CMIG4.SA: )(CIG.N: ), the combined utility controlled by Minas
Gerais state, has 19 plants with concessions coming due in
2020. Parana state’s Copel (CPLE6.SA: )(ELP.N: ) also has
concessions for seven power plants ending in 2019.

Stock Market Research
(Reporting by Elzio Barreto; editing by Andre Grenon)

UPDATE 2-Brazil denies energy contract renewal by decree