Jeb Blount

Sao Paulo, Dec. 5 (Bloomberg) — Brazil’s Cia. Energetica de Sao Paulo shares plunged 5 percent after Spain’s Endesa SA followed AES Corp. and said it won’t bid for a controlling stake in the utility, crimping hopes the company will sell for $1 billion or more.

Endesa and Arlington, Virginia-based AES, the No. 1 U.S.- power plant developer, join Paris-based Electricite de France and Atlanta-based Southern Co. in last-minute withdrawals from the government’s planned auction tomorrow of Cesp, as Brazil’s No. 3 electricity generation utility is known.

Only two qualified bidders remain: Lisbon-based Electricidade de Portugal SA and Charlotte-based Duke Energy Corp. Some expect that only Duke will bid.

A spokesman for Endesa’s Enersis SA unit in Chile confirmed that the company has withdrawn from the auction. The spokesman said the company asked the state to postpone the sale because of pending problems in Cesp such as the company’s short-term debt totalling 1.8 billion reais that needs to be rolled over. Enersis expressed such concern in a statement earlier this week.

“Duke is seen as the only likely bidder,” said Lucio Aldworth a utility analyst with Banco Pactual in Rio de Janeiro. “If that happens the price the company will sell for is 1.7 billion reais, the minimum price.”

The no-shows want more time to access the potential of Cesp’s Porto Primavera hydroelectric project, which won government environmental approval yesterday. Bidding for Cesp will start at 1.74 billion reais ($884 million) at 9 a.m. (6 a.m. New York) on the Sao Paulo Stock Exchange.

Last Minute

AES, EDF, EDP and Southern want the state to postpone the sale despite earlier calls on the government to rush through the environmental permits for Porto Primavera before the auction.

“The environmental license was granted at the last minute. It does not give us enough time to analyze its conditions,” said Andrea Ruschmann, chief financial officer of Cia. de Geracao de Energia Eletrica Tiete, a Brazilian utility controlled by AES.

The license to operate the hydroelectric generation station does not guarantee that Cesp will be able to fill the project’s reservoir with water, a precondition to producing energy at Porto Primavera, the companies said.

The expected lack of competition disheartened minority investors, who dumped Cesp stock. Cesp preferred shares fell 4.7 percent to 19.35 reais and as much as 7.9 percent to 18.70 reais, its lowest intra-day prices since Nov. 20.

Meanwhile Brazil’s benchmark Bovespa index rose 3.7 percent its biggest rise since Oct. 26. Cesp was one of only 6 stocks on the 57-stock Bovespa index to fall.

Cesp common shares fell 1.3 percent to 16.98 reais and as much as 7 percent to 16 reais, the lowest intra-day price since Nov. 20.

CESP preferred shares are the company’s most traded class of stock.

Banespa Hopes

In the wake of Banco Santander Central Hispano SA’s decision last month to pay 7.05 billion reais, or about four times the government’s asking price, for Banco do Estado de Sao Paulo SA, some investors were hoping for a high premium in the Cesp sale, Aldworth said.

“Its reasonable to assume they won’t be getting anything like the Banespa premium,” he added.

EDP and Duke have until later today to deposit bid guarantees with the Sao Paulo Bovespa stock exchange’s clearing house to make bids at auction.

U.S.-based Duke still plans to bid, Gazeta Mercantil daily newspaper reported today. Duke officials could not immediately be reached for comment.

Court Challenge

If the government refused to delay the sale to allow more time for the reservoir to fill, EDP said it may not bid for Cesp. The government, though has no plans to delay the sale, according to Gov. Mario Covas, whose Sao Paulo-state controls 39 percent of Cesp’s stock as well as 61 percent of its voting shares.

Still, if the government fails to delay the sale, the courts may do it instead. Groups opposed to Cesp’s sale have already won an injunction against the auction, though if previous state-asset sales are a guide, the government is likely to have them overturned.

Jose Kallas, chief judge of the federal court in the Sao Paulo region, is expected to overturn an injunction suspending Cesp’s auction today, analysts said.

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