Eletropaulo Rallies on Profit, Efficiency Gains: Sao Paulo Mover

Eletropaulo Metropolitana SA, Brazil’s largest electricity distributor, gained the most in eight weeks after second-quarter profit rose four-fold and blackouts declined.

Shares in the company, a unit of Arlington, Virginia-based AES Corp. (AES), rose 6.2 percent to 6.32 reais today in Sao Paulo, the biggest advance since June 14. It was the best performance on the 16-member Bovespa Electric Energy Index, which added 1.5 percent.

The results fueled optimism about the company’s prospects after Brazil’s power regulator Aneel ordered the utility to cut rates by an average 2.3 percent last year and didn’t allow an increase this year, according to Pedro Galdi, the chief strategist at Sao Paulo-based brokerage SLW Corretora. Shares in the utility have lost 62 percent this year.

“Those numbers were really good and showed Eletropaulo is not dead,” Galdi said in a telephone interview. “Future periodic rate reviews may be better.”

Adjusted net income rose to 245.3 million reais ($107.2 million) in the three months through June from 56.6 million reais in the same period one year earlier, Eletropaulo said in a regulatory filing yesterday after the market closed.

The utility’s power losses in its system fell to a record low of 9.9 percent in the second quarter as the duration of supply interruptions declined 12 percent to 8.05 hours in the 12 months through June, below the 8.49 hours target of the country’s regulator, according to the filing yesterday.

Eletropaulo has the worst recommendation consensus among Brazilian power utilities, with 11 sells, five holds an no buys, data compiled by Bloomberg show.

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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