Four Brazilian electric utilities are bidding to buy Ashmore Energy International's assets in Brazil, worth as much as 7 billion Brazilian reais ($3.95 billion), in a deal that could determine market leadership in the country, Valor Economico newspaper reported Friday.

The leading contenders to buy the generation and distribution assets of Ashmore are state-controlled utility Companhia Energetica de Minas Gerais or Cemig (CIG, CMIG4.BR); Neoenergia SA, controlled by Spain's Iberdrola Energia SA; CPFL Energia SA (CPL, CPFE3.BR), Brazil's biggest non-state utility; and AES Corp.'s (AES) Brazilian units, Valor reported, without saying where it got the information.

Successful bids by AES or CPFL would make the company the leader in the distribution industry, Valor said.

The battle between CPFL and Neoenergia could decide the fate of future mergers. CPFL was reportedly seeking to buy Neoenergia, but should Neoenergia succeed in buying the Ashmore assets, it could turn the tables on its rival or at least block expansion by CPFL, Valor said. CPFL was negotiating to buy the assets last year but Ashmore pulled out, Valor said.

AES, which controls energy distributor Eletropaulo, may surprise investors and come away with the assets by offering to swap Ashmore's Brazilian assets for a stake in the U.S. parent company, Valor said.

Cemig seeks to enter the Sao Paulo market through the asset purchase and may use a yet-to-be-created investment fund to finance the purchase, Valor said.

-By Paulo Winterstein, Dow Jones Newswires; 55-11-3544-7073; paulo.winterstein@dowjones.com