Brazilian power utility CFLCL claimed victory on Monday after Brazil's securities regulator ruled there were no grounds for a shift in its control advocated by U.S. minority shareholder Alliant Energy Corp.

Alliant sought voting rights in CFLCL, or Companhia Forca e Luz Cataguazes-Leopoldina CFLCL, arguing that years of losses by the Brazilian company meant its preferred shares should be converted into voting shares to improve management.

But Brazil's CVM, the equivalent of the U.S. Securities and Exchange Commission, on Friday deemed as valid CFLCL's decision in late 2003 to sell one of its units, proceeds from which allowed the company to post a small profit for 2003 after two years of losses.

The profit made it possible for Brazil's Botelho family to retain control over the company by avoiding the conversion of preferred stocks into voting shares.

"For us, this CVM decision really closes the discussion about control," said Carlos Aurelio Martins Pimentel, CFLCL investor relations manager.

Alliant Energy officials declined to comment, saying they received the CVM document on Monday and had to analyze it.

Brazilian law states that preferred shareholders should get voting rights if a company has three consecutive years of losses and does not pay dividends.

CFLCL posted a profit of 16.9 million reais for 2003 after a loss of 73 million in 2002. It also had a loss in 2001.At the start of this year, Alliant accused CFLCL management of denying preferred shareholders their rights and organizing a media campaign to misinform the public about Alliant's intentions.

CFLCL said Alliant and another shareholder, Fondelec, were trying to take indirect control of the company in order to boost its value and then sell their stakes. Alliant denied it.

Alliant has a 39.4 percent stake in CFLCL's total capital and Fondelec has a 13.1 percent stake.CFLCL, which has annual revenues of around 1.3 billion reais, serves around 2 million people in the states of Minas Gerais, Rio de Janeiro, Sergipe and Paraiba.

Botelho family members say the company's problems derived from Brazil's mandatory power rationing in 2001 and 2002.Alliant has argued that CFLCL also had no profits for two years before 2000, when it only obtained a profit thanks to the stake that Alliant bought.

(From Reuters, September 27, 2004)

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