Eletrobras Falls on Report It May Sell Units Amid Rate Drop

Centrais Eletricas Brasileiras SA (ELET6), South America’s largest power generator, fell to the lowest in seven years after Valor Economico reported the company may sell subsidiaries as the government forces a cut in utility rates.

Preferred shares of Eletrobras, as the state-controlled company is known, declined 0.5 percent to 15.34 reais at the close of trading in Sao Paulo, the lowest since Aug. 29, 2005. Voting shares dropped 1.3 percent to 10.90 reais, the lowest since September 2003. The benchmark Bovespa index gained 2.1 percent.

Eletrobras may sell all or part of six power distributors in the medium to long term in an attempt to preserve profit after new rules go into effect that will lower revenue by 8.5 billion reais ($8.2 billion) a year, Valor Economico reported today, citing an interview with Chief Executive Officer Jose da Costa Carvalho Neto. In 2011, Eletrobras’s revenue was 33.1 billion reais.

“The market is definitely concerned about this kind of intervention,” Sandro Fernandes, a trader at Belo Horizonte, Brazil-based brokerage Corval, said by phone.

President Dilma Rousseff unveiled measures in September to force power companies to cut rates by as much as 28 percent as part of the government’s efforts to bolster economic growth and damp inflation. The measures include revised conditions for the renewal of licenses expiring between 2015 and 2017.

“All possibilities are under discussion,” Eletrobras’s press office said in an e-mailed response to questions from Bloomberg News about the Valor news report.

Preffered shares have lost 43 percent this year, while voting shares have dropped 39 percent.

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

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