Eletrobras Leads Bovespa Index as Recovery Plan Buoys Prospects

Centrais Eletricas Brasileiras SA (ELET6), Brazil’s biggest power utility by sales, rose the most in four months after announcing dividend payments and a plan to return to profitability.

Preferred shares of Eletrobras, as the company is known, surged 15 percent to 12.58 reais at 1:56 p.m. in Sao Paulo and rose as much as 17 percent, its biggest intraday advance since Nov. 30. The stock was the best performer on the benchmark Bovespa index, which was little changed.

Eletrobras said in a regulatory filing after the market closed yesterday that it will invest as much as 52.4 billion reais ($26 billion) through 2017. Investors see the plan as a reaction to President Dilma Rousseff’s decision last year to cut electricity prices to contain inflation and boost the economy, said Pedro Galdi, the chief strategist at Sao Paulo-based brokerage SLW Corretora, who rates the stock buy.

“The utility is also paying dividends for 2012, which is another good sign of efforts to continue to be a company that remunerates well,” Galdi said.

Eletrobras will pay 1.63 real per preferred stock in April, the company said in a separate filing yesterday. Shares in the government-run utility slumped 61 percent in 2012, while the Bovespa advanced 7.4 percent.

Eletrobras, which reported a 6.88 billion real net loss last year, would have had a 3.2 billion real profit if it didn’t have to renew concession terms, Chief Financial Officer Armando Casado de Araujo told reporters today.

At the same event, Chief Executive Officer Jose da Costa Carvalho said about 4,500 of the company’s 27,000-person workforce will probably accept a voluntary retirement package as the company strives to bring down costs by 30 percent and make distribution units profitable by 2015.

“We have to reduce our costs and fast,” he said.

The company will seek about 3 billion reais in government- backed loans from state banks as part of the 18.5 billion reais still needed to fund investments through 2017.

To contact the reporters on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net; Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.net

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

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