(Adds time of privatization, PM comments paragraphs 3, 13-14)
By Jude Webber
LIMA, Peru, June 13 (Reuters) - Men stripped to their underwear and painted bright red to symbolize devils protested in Peru's southern city Arequipa on Thursday on the eve of the scheduled privatizations of electricity generators Egasa and Egesur in a last-ditch attempt to have the sales scrapped. ADVERTISEMENT
Cash-strapped Peru wants at least $156 million for the southern firms, which have aging hydro-electric and diesel generators, up to three-quarters of which are idle. But locals fear higher bills and layoffs, and say President Alejandro Toledo is reneging on a pledge not to sell them.
Officials have brushed off the protests, saying the privatization will go ahead as planned at 11:00 a.m. local time (noon EDT/1600 GMT) on Friday. But in a fresh blow, U.S. company NRG Energy Inc. (NYSE:NRG - News) told Reuters on Thursday it would not be bidding because of unfavorable market conditions.
"NRG is not bidding on these assets," spokeswoman Meredith Moore told Reuters. "It's in keeping with our policy of not pursuing international business developments at this time."
That leaves three pre-qualified bidders: U.S. firm Public Service Energy Group (NYSE:PEG - News), Belgium's Tractebel SA (Brussels:TREBT.BR - News) and Norway's state utility Statkraft. Although the government says the sale will go ahead even if there is only one bidder, with its popularity in the doldrums, it will want to avoid charges of flogging the companies off at any price.
Only Colombia's state-run Interconexion Electrica SA (ISA) (ISA.CN) showed up for last week's $262 million concession of electricity transmission companies Etecen and Etesur. Some pressure groups complained there was too little competition.
MAJOR HEADACHE
Privatization, a key plank of the government's pro-market economic policy, has become the biggest headache for Toledo, who took office last July promising to create jobs and boost prosperity in this poor Andean nation, where half the population lives on $1.25 a day and unemployment is rife.
The government, scrambling for cash to keep the budget deficit in check and to spend on poverty relief, is aiming to raise up to $800 million through state sales this year.
Toledo's popularity has slumped to nearly 20 percent amid protests at the slow pace of progress. After Alberto Fujimori's 1990-2000 hard-line rule -- when $9 billion was raised by state sales but much of that squandered -- they want to ensure the government does not ride roughshod over their wishes.
"Toledo promised in Arequipa that he wouldn't privatize Egasa and Egesur. We're only asking him to keep his word," Geronimo Lopez, head of a local pressure group which called the strike, told CPN radio. Egasa is based in the department of Arequipa and Egesur in Tacna.
He said the sales should at least be delayed until after regional elections in November, to allow incoming local authorities to decide what to do with the utilities.
PRIME MINISTER BLASTS PROTESTS
Residents in the colonial city of Arequipa waved banners saying "The people are indignant," and protests were under way in the other southern cities of Tacna, Puno and Cusco.
But Prime Minister Roberto Danino slammed them as "self-destructive" and other officials called them a flop.
"They generate instability and seek to create a climate of uncertainty that scares off investors," Danino told reporters.
"We are against the authoritarian attitude of the government and President Toledo's imposition of the sales of the southern electricity companies," said Daniel Vera, a local protest leader in Arequipa, flanked by two men dressed as devils and wearing signs saying "Toledo" and "Kuczynski." Pedro Pablo Kuczynski is Peru's economy minister.
There was a small protest in central Lima in sympathy and police there used tear gas to break up clashes.
In Arequipa, where 1,200 police were on duty, seven people were arrested. Officials said around 45 percent of shops were open but transport services were disrupted.
Peru has raised nearly $400 million through asset sales this year and the government insists there will be no delay to the Egasa and Egesur sales.
It has promised to plow cash raised into infrastructure projects and the cash is vital to plug a budget deficit which it is striving to keep to 1.2 to 2.2 percent of gross domestic product -- a goal many economists say will be hard to reach.
Among other expected bidders, PSEG spokesman Paul Rosengren told Reuters on Wednesday: "We are constantly evaluating options" and Tractebel said it "is still interested," but both companies stopped short of saying they would present bids.
There was no immediate comment from Statkfraft.