Eletrobras Falls Most on Bovespa on Forecast for Reduced Profit

Centrais Eletricas Brasileiras SA (ELET6), South America’s largest power generator, fell the most on the Bovespa index after saying earnings and sales will decline significantly as the Brazilian government seeks lower rates.

Preferred shares slid 6.1 percent to 7.36 reais at 1:29 p.m. in Sao Paulo. A close at that level would be the lowest since October 2002. The benchmark Bovespa index gained 0.4 percent.

Eletrobras, as the Rio de Janeiro-based utility is known, said in a regulatory filing today that earnings before interest, taxes, depreciation and amortization and revenue from generation and transmission businesses will be “significantly lower” next year. Brazil is ordering cuts to power rates of as much as 28 percent as part of an effort to bolster economic growth by reducing expenses for manufacturers.

The government is offering Eletrobras 14 billion reais ($6.7 billion) in cash as compensation for agreeing to modify rates laid out in contracts set to expire in 2015 and 2017, less than half the 30 billion reais the company had said it expected to receive.

Brazilian manufacturers pay more for electricity than their peers in the U.S., most of the European Union and the largest emerging markets -- China, Russia and India -- according to a report published in July by the industrial federation of Rio de Janeiro, known as Firjan.

Eletrobras’s preferred shares lost 71 percent this year through yesterday.

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

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net