LISBON, Portugal - Portugal may have to brave the most turbulent stock markets in three years as it seeks buyers for state-owned assets to meet the terms of its bailout package.

Prime Minister Pedro Passos Coelho is seeking to sell holdings in power company EDP-Energias de Portugal SA and grid operator REN-Redes Energeticas Nacionais SA, which have a combined value of 2.17 billion euros ($3.09 billion), in the third quarter.

Under its 78 billion-euro European Union-led rescue, Portugal agreed to speed asset sales through 2013.

"It's clearly the worst of times to carry out privatization," Andre Pinheiro, who helps oversee 100 million euros of assets at Orey Financial SA in Lisbon, said. "Market instability won't help."

With the country's debt and borrowing costs soaring, Portugal followed Greece and Ireland in April in seeking a bailout. Portugal's debt swelled to 93 percent of GDP in 2010 from 68 percent in 2007.

The European Commission forecasts debt will rise to 101.7 percent this year and 107.4 percent in 2012 before starting to decline after 2013.

The asset sales represent 3 to 4 percent of the country's debt, not a significant chunk, said Manuel Caldeira Cabral, an economics professor at Minho University in Braga.

"The moment Portugal and Europe are facing isn't the best, but privatization can be a sign we are working and not postponing our problems," he said.

Portugal's austerity plan aims to reduce the budget deficit to the EU ceiling of 3 percent of GDP by 2013 from 5.9 percent in 2011 and last year's 9.1 percent. Still, the package risks deepening Portugal's recession.

The bailout plan included forecasts for a contraction of 2.2 percent in 2011 and 1.8 percent in 2012.

Under the rescue, the government must still identify two additional "large enterprises" to sell by the end of 2012 and submit an updated asset-sale plan by March next year.

The Newspaper Expresso reported on July 9 that State Grid Corp of China and another Chinese company were interested in buying a stake in EDP-Energias. REN-Redes also attracted interest from State Grid of China, as well as funds including Norway's sovereign wealth fund, Expresso said.

On Wednesday, China Power International Development Ltd said its parent company has been in talks with EDP but at the moment has no plan to acquire shares.

"The environment has become increasingly more difficult and the state may have to offer assets at quite a significant discount on the price," said Tullia Bucco, an economist at UniCredit Global Research in Milan.

"For Portugal overall, I see more risk regarding the price the country can get for the assets than the capacity to actually fulfill the program."

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