Alliant sees 2nd ruling on CFLCL dispute by end-Apr

Bnamericas Published: Friday, April 15, 2005
A Paris-based arbitration court is expected to reach a final ruling by end-April on a dispute between US power company Alliant and the controlling shareholders of Brazilian power company CFLCL, Alliant's Brazil manager Carlos Miranda told BNamericas. Alliant is questioning changes in company by-laws and capital reductions in CFLCL decided by controlling shareholders the Botelho family in 2003, which ignored decisions made at shareholders' meetings. The US company, which has a 38% stake in CFLCL, claims the decision was a maneuver to block Alliant and other minority stakeholders from obtaining influence in managerial decisions. Other shareholders in CFLCL include US investment fund Fondelec and local minority holders such as pension fund Funcef. CFLCL posted a net profit of 12mn reais in 2003 but would have posted a loss if management had not decided to sell some assets, Alliant and other minority shareholders claim. It would have been the third year in a row that CFLCL posted a loss, which would have given non-voting right minority shareholders voting rights under Brazilian law. The decision to sell the assets also hurt the company's finances, Alliant said. "The dispute over voting rights is not ended, but the agreement over [83MW thermoelectric plant] Juiz de Fora could influence a final accord," Miranda said. The same arbitration court ruled in January that CFLCL has to pay Alliant 60.3mn reais in compensation for not complying with a shareholders' agreement to invest in closing Juiz de Fora's plant cycle. The court also said CFLCL had to cover Alliant's 1.1mn reais legal costs. However, the two sides recently came to an out-of-court settlement that reduced the payment to 54mn reais and gives Alliant an option to keep its stake in the power plant, Miranda said. Alliant would keep its stake as compensation for investments that CFLCL should have made, according to the shareholders' agreement. Concerning the 6mn-real difference between the amount determined by the court and what was agreed by the two companies, Miranda said, "We would be giving a discount to ourselves since we also have a stake in CFLCL." Although CFLCL has paid Alliant a 29mn-real down payment, Alliant has not transferred any shares to CFLCL. The transfer would only be made if either company opts not to continue the joint venture. If this happens, CFLCL would have to pay Alliant the remaining 25mn reais by May 15, Miranda said. If they decide to continue in the joint venture, CFLCL does not need to pay any more money and Alliant will keep its 50% stake. "Juiz de Fora is a profitable plant and there are many opportunities to make money in Brazil's power sector," Miranda said. The company is not planning to divest assets in Brazil before obtaining a return on its US$450mn investments in the country, he added. CFLCL is a power company with distribution, generation and construction engineering operations headquartered in the southeastern state of Minas Gerais.

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