SAO PAULO (Reuters) - Oaktree Capital Management LP has entered the race to buy control of Renova Energia SA (>> Renova Energia SA) with a proposal that would inject fresh capital and help refinance part of the Brazilian renewable energy firm's debt maturing this year, two people with direct knowledge of the plan said on Wednesday.

The people said Oaktree would pay 170 million reais (39.47 million pounds) for Light SA's 16 percent stake in Renova and spend another 1.2 billion reais to dilute Renova's controlling bloc. It also involves the refinancing of Renova bank loans maturing this year, freeing up collateral, the people said. Los Angeles-based Oaktree [OAKCP.UL], the world's biggest distressed debt investor, is competing with Brookfield Asset Management Inc (>> Brookfield Asset Management Inc) for Renova. Late on Tuesday, Renova confirmed a July 3 report by Reuters that Brookfield has made a non-binding proposal for control of the company. Under the terms of that proposal, Light would get 200 million reais for the stake it has in Renova, which would also get 800 million reais in fresh capital.

Newfound interest in Renova underscores a view among foreign investors that Brazil's renewable power industry remains resilient even as consumption suffers with the country's worst recession ever. Peer Omega Geração SA could raise up to 2 billion reais in an initial public offering slated to price this month.

Renova and Oaktree, which oversees about $100 billion in assets, did not have an immediate comment. Light declined to comment.

Units of Renova (>> Renova Energia SA), a blend of Renova's common and preferred shares, have jumped almost 30 percent since January 2 when Reuters first reported that the company could be taken over. That compares with a 4.5 percent gain in Brazil's benchmark Bovespa stock index <.BVSP>.

According to one of the people, who requested anonymity to discuss the matter, both non-binding bids from Brookfield and Oaktree would give equal treatment to minority shareholders. The so-called tag along will be based on the proportion of common and preferred shares contained in Renova's units - the company's most widely traded class of stock, the person said.

Renova has struggled with a severe cash crunch over the past couple of years. By injecting capital, a new buyer would give Light (>> Light SA) the chance to exit Renova and reduce the stakes held by the other two members of Renova's controlling bloc - CiaEnergética de Minas Gerais SA (>> Cia Energetica de Minas Gerais CEMIG) and RR Participações SA. Cemig and RR Participações declined to comment.

A transaction with Oaktree could reduce Renova's short-term debt by 6 percent while bolstering capital at least 13 percent, depending on the conclusion of the Alto Sertão III windfarm project, the same person said. Oaktree could opt to refinance Renova's short-term debt or just a loan with state-controlled Banco do Brasil SA, the person said.

Financing conditions for Renova, which was founded in 2001, worsened significantly when a partnership with SunEdison Inc (>> Sunedison Inc) collapsed weeks before the latter filed for Chapter11 bankruptcy protection in the United States.

Reuters first reported in April last year that Renova has been looking for a partner and fresh capital.

(Reporting by Guillermo Parra-Bernal; editing by Diane Craft)

By Guillermo Parra-Bernal