MPX, E.ON venture to favor Brazil for new projects

A new JV formed between German utility E.ON (NYSE: EON) and Brazilian tycoon Eike Batista's power company MPX is likely to concentrate on new power projects in Brazil rather than Chile, a spokesman for the former company told BNamericas.

"It hasn't been properly defined from now on [but] most of the 20GW target should come from Brazil. The request from Brazil is huge compared to Chile," the MPX spokesman said.

The firms announced plans on Wednesday to form a 50/50 JV focusing on the development of up to 20GW in new thermo and renewable power generation projects in the Latin American nations.

Approximately 50% of MPX's shares in the 5.4GW Açu, 1.3GW Sul and 2.2GW TPP Parnaíba power projects in Brazil, inclunding the 2.1GW Castilla project in Chile will be included in the JV's portfolio.

To finance the new JV, MPX plans to raise 1bn reais (US$555mn) through a capital increase. E.ON has already committed 850mn reais in order to achieve a 10% shareholding in the Brazilian firm.

MPX as well plans to spin off its coal mining assets in Colombia held by subsidiary CCX into a separate company.

The MPX spokesman confirmed that the firms plan to finalize the transaction next quarter, after completion of due diligence.

The transaction provides E.ON with its first entrance into the Brazilian power market. The German firm has before said it seeks to generate around 25% of its operating profit outside Europe by 2015.

Media reports suggest that E.ON's total investment through the JV could reach US$5.5bn.