The Brazilian government has announce its intention to divide the southern regional integrated power company, Companhia Paraense de Energia (Copel) into five separate subsidiaries and seek investors for 85 per cent of the voting shares. Foreign interest is expected and the government is confident it can overcome political opposition to the privatization.

At the insistence of the Agencia Nacional de Energia Electrica (Aneel), Copel’s various power and other interests are to be separated and five new subsidiaries will be created covering generation, transmission, distribution, telecommunications and corporate partnerships. Shareholders had approved the division in December 2000. The Parana government has yet to decide whether each unit will have to be auctioned separately or as a block.

A decision on the sell-off will be reached following the receipt of a consultants report and a price is due to be announced August 1.

Spain’s Endesa and Electricit�e France were the first companies scheduled to visit Copel. Other companies said to have shown early interest are AES and Duke Energy of the US; Iberdrola of Spain; Hydro Quebec; and Electricidade de Portugal.

The sale of Copel, which serves 2.7 million customers, comes at a time when the country is facing a power crisis with blackouts expected following low rainfall levels and under-investment in the electricity industry. The energy rationing has damaged the economy of Brazil and the crisis forced the cancellation of the proposed sale of San Paulo state power company Cesp in May.

The Copel sale has different characteristics argued Ingo Hubert, Paranas secretary of finance, in a recent interview with the Financial Times. “The situation of Copel is fundamentally different from previous utility sales,” said Hubert. Copel would be unaffected by water shortages elsewhere in the country and limitations to transmission grids prevented rationing in the south of the country.

Potential investors in Copel will however, be carefully examining the regulatory environment and will be looking for reforms to the rating policies as well as a solution to the impasse between distributors and generators over who is to bear the cost of power rationing.