CPFL Energia has agreed to buy a power distributor based in southern Brazil from AES Corp., the two companies have announced.

AES Sul is based in Porto Alegre and distributes electricity to around 1.3 million clients. CPFL Energia SA, Brazil’s largest private utility, will pay 1.7 billion reais ($486 million) for the firm, which will increase its market share by just over one percentage point to 14.3 per cent.

"The agreement to buy AES Sul strengthens our strategy to grow in distribution," CPFL Chief Executive Officer Wilson Ferreira Junior said in a statement.

The deal must be approved by Brazil’s regulatory authorities and is expected to close in the second half of 2016, AES said.

"The sale of our distribution company, Sul, in Brazil is yet another step we are taking to optimize our portfolio for future value creation," said Andrés Gluski, AES President and CEO. "We are proud of the work we have done at Sul over the past 19 years to improve safety, systems and operations, but believe that today we can best serve our shareholders by redeploying our capital in other businesses and to de-risk the company."