Volume 6, Number 4, Page 5

Privatization in the State of Paraná, Brazil

By Noronha Advogados

Last December 8, the State Legislature and Governor of Paraná authorized the Executive Branch to implement the corporate restructuring of COPEL, the state-owned electric company in Paraná, thus allowing for its privatization.

Although the selling price and the privatization process have yet to be established, it is expected that COPEL will be split-up into three new companies; the first responsible for the generation of energy, the second for its distribution and the third for its transmission.

COPEL was created 44 years ago, and since its inception has performed a fundamental role in building quality services in the State of Paraná. Nowadays, there are only seven municipalities in which the company does not directly act in the distribution of electricity. COPEL is presently the largest company of the State of Paraná, with more than seven thousand employees. It is also the largest state-owned company in the Brazilian Southern region, with a net equity of over R$ 4.8 millions. It was the first company in the Brazilian electric sector to be publicly traded on the New York Stock Exchange.

The Federal Government of Brazil expects to obtain additional authorization from State of Paraná to privatize COMPAGÁS, a subsidiary of COPEL responsible for the exploitation of natural gas in the State; and SERCOMTEL, the telephone communications company of the City of Londrina, whose shares are mostly held by COPEL.

COMPAGÁS, which supplies natural gas to the State, is considered of fundamental importance to Paraná's economy, due to the low pollution factor of natural gas as well as its efficiency compared to other kinds of fuel. Presently, 51 percent of COMPAGÁS' shares are held by COPEL; the remaining 49 percent are held by the private sector.

SERCOMTEL in turn, completed 32 years of activities in 1998, consolidating itself as one of the most efficient operators of the country and a pioneer in activating modern technologies,

SANEPAR, a mixed-economy company created in 1963, is responsible for providing basic sanitation services to almost all of Paraná, corresponding to approximately 98 percent of the State's population. In order to benefit the entire population, SANEPAR intends to invest R$ 1.5 billion over the next eight years. It is the sixth largest company of Paraná; 35 percent of its shares are held by the private sector.

According to government estimates recently published by the press, the privatization expected to take place in early 2000, will provide the state treasury with over R$ 4.1 billion. n

Noronha Advogados is a law firm with offices in São Paulo, Rio de Janeiro, Brasília, Miami and London.