Centrais Eletricas Brasileiras SA, the worst performing emerging market stock in the past six months, is seeking to cut its workforce by as much as 15 percent after Brazil’s government reduced electricity prices.
Eletrobras, as the Rio de Janeiro-based power utility is known, is studying a voluntary retirement package that aims to reduce its 28,000 person payroll by 10 to 15 percent, the state-run company’s press office said in a e-mailed response to questions. The terms of the package haven’t been set yet and once they are, will require regulatory and government approvals.
Eletrobras has dropped 51 percent in Sao Paulo trading since July 31, the worst six-month performance among the 821-member MSCI Emerging Markets Index. The slide occurred as the government enacted a package to slash power rates by as much as 32 percent, in an attempt to boost economic growth. Under the terms of the government package, announced in November, utilities will cut generation and transmission rates in exchange for 30-year concession renewals and compensation payments.
The lower rates will almost wipe away Eletrobras’s earnings before interests, taxes, depreciation and amortization, or Ebitda, Chief Financial Officer Armando Casado de Araujo said Nov. 21. Eletrobras is Brazil’s largest electricity company by generation and transmission capacity. Fitch Ratings Ltd. and Moody’s Corp. both lowered Eletrobras’s credit rating in December, after it agreed to accept the lower rates.