Eletrobras Leads Drop in Brazil Utilities on Power Rates Concern

Centrais Eletricas Brasileiras SA (ELET6) fell to the lowest in seven years, leading a plunge in Brazilian utilities, amid concern the government will seek to lower electricity rates.

Voting shares of Eletrobras, as the largest Brazilian utility is known, fell 4.7 percent to 18.45 reais at the close in Sao Paulo, the worst performer on the benchmark Bovespa index, which rose 3.8 percent. CPFL Energia SA (CPFE3) lost 3.4 percent to 24.50 reais. The MSCI Brazil/Utilities index slid 3 percent.

Mines and Energy Minister Edison Lobao told newspaper Valor Economico in June that the government was looking for ways to lower energy rates. A ministry press official declined to comment on the matter today. Central bank President Alexandre Tombini told reporters at an event in Sao Paulo today that the government is studying ways to cut taxes on energy. He didn’t provide details.

“It is not so simple to understand how new actions from the government could affect different companies,” Wagner Salaverry, director at Geracao Futuro Corretora, said by phone from Porto Alegre. “The impact for distributors would be different from the impact on power generators, for instance. So investors get a little cautious.”

To contact the reporter on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net