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Brazil Cancels Privatization of Utilities
Feb 2, 2002

The government of the south Brazilian state of Parana has cancelled the privatisation of Copel, a large utility, after a series of delays and legal challenges according to an article by Thierry Ogier of the Financial Times, January 29, 2002. .

A controlling 88.5 per cent stake in Copel failed to attract bidders during two auctions late last year.Potential investors, which included Belgium's Tractebel were deterred by the failure of the regulatory framework in Brazil to provide adequate guarantees to private investors. The asset had been valued at Dollars 2.1bn but

Additional state intervention and regulation of the electricity market announced by the Federal government made investments in Barzilís state owned utilities after the spot market for energy was eliminated and price deregulation, which was to have been introduced from 2003, was postponed indefinitely.

Copel, a profitable company that generates about 7 per cent of Brazil's total power capacity, will now remain under state control.

Among the reasons to postpone indefinitely the privatisation of the utility was the recent turbulence experienced by Argentina. Apparently, this circumstances have also motivated the government decision to postpone the privatisation of large power generators Furnas, Chesf and Eletronorte until a new administration is sworn in next year.

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