Codelco Approves Energy Unit Sale for Copper Expansion (Update2)

Jan. 7 (Bloomberg) -- The board of Codelco, the world’s largest copper producer, approved a plan to sell the Chilean state-owned company’s stake in power generator E-CL SA.

Chile’s government will allow Codelco to retain all proceeds from the 40 percent E-CL stake to help finance investments, Chairman Gerardo Jofre told reporters in Santiago.

Codelco is seeking financing for a plan to spend $15 billion in the next five years to ramp up production from its aging mines based in Chile after the metal’s price jumped 30 percent last year to record levels. It plans to start presenting the sale to prospective buyers next week and may complete the divestiture in two to three months, Jofre said today.

"This isn’t our core business,” he said. "We are very optimistic about receiving a very attractive price.”

A unit of JPMorgan Chase & Co. and Larrain Vial SA are handling the transaction, Codelco said today in an e-mailed statement. A unit of Banco Santander SA is co-manager.

E-CL, which supplies power to northern Chile’s mining region, rose 0.4 percent to 1,205 pesos at 1:24 p.m. New York time in Santiago trading. The 40 percent stake is worth $1 billion based on current market value. Codelco Chief Executive Officer Diego Hernandez declined to estimate the sale price in comments to reporters today.

The stock trades at 4.35 times trailing profit, making it the second-cheapest electricity company in Chile, according to data compiled by Bloomberg.

GDF Suez Stake

Codelco has said it may either sell the holding to GDF Suez, which owns a controlling interest in the company, or sell shares on the Santiago Stock Exchange. GDF Suez, based in Paris, is the operator of Europe’s largest natural-gas grid.

Juan Claveria, head of GDF Suez’s operations in Chile, told reporters in Santiago today that the transaction is "subject to evaluation” and that GDF Suez is yet to make any decision.

No shareholder has preferential rights over Codelco shares, Chairman Jofre said today. The proceeds from the sale will cover about a third of Codelco’s capital expenditure budget for 2011, Hernandez said.

Copper for March delivery reached a record $4.498 a pound in New York on Jan. 3. It fell 1 percent to $4.2865 at 1:47 p.m. New York time today.