Eletrobras Leads Brazil Utilities Rout on Depleted Reservoirs

Centrais Eletricas Brasileiras SA led a plunge among Brazilian power companies on concern a spell of dry weather in parts of the country has drained hydropower reservoirs to the point where energy rationing may be needed.

Eletrobras, as Brazil’s third-biggest electric utility by market value is known, fell 4.6 percent, the biggest drop in six weeks on a closing basis. AES Tiete SA, the fifth-biggest, slid

3.9 percent, while Eletropaulo Metropolitana SA tumbled 4.2 percent.

Rainfall in northeastern Brazil that was 50 percent below normal in December has dropped reservoirs below the level considered safe by the government for operating dams. Reservoirs in the region were 32 percent full on average last month, less than the 34 percent minimum, according to data on the national power grid operator’s website.

“If an energy rationing really happens, utilities would generate less power and consequently have smaller revenue,” Henrique Kleine, an analyst at the brokerage firm Magliano SA in Sao Paulo, said by telephone.

The MSCI Brazil Utilities Index slid 2.2 percent. Cia. Energetica de Minas Gerais, Brazil’s second-biggest electric utility by market value, fell to its lowest in a year.

Brazilian President Dilma Rousseff asked power utilities to attend an emergency meeting on Jan. 9 to discuss the risk that the country’s reservoirs might fall so low that energy rationing is needed, the newspaper Folha de S.Paulo reported today, citing unidentified government officials.

Energy Rationing

A presidential press officer who asked not to be identified in accord with internal policy said by phone from Brasilia that Rousseff is on vacation and there is no such meeting on her schedule.

The Ministry of Mines and Energy said in a statement today on its website that Minister Edison Lobao will hold a monthly meeting with government officials and regulators on Jan. 9. Utility representatives may also attend, according to the statement, which didn’t mention Rousseff.

Any energy-rationing plan “would be an extra problem for these companies, who are already facing declining income because of recent measures taken by the government to cut rates,” said Kleine at Magliano.

Rousseff announced on Sept. 11 a plan to reduce power costs by as much as 28 percent to aid households and manufacturers to boost economic growth. Changes in contracts will be negotiated with utilities as concessions on government-owned hydroelectric plants which expire between 2015 and 2017 are renewed, she said.

Preferred shares in Eletrobras, based in Rio de Janeiro, fell to 10.71 reais at 4:42 p.m. in Sao Paulo, the biggest decline on the MSCI Brazil Utilities Index.

AES Tiete dropped to 21.53 reais, and Eletropaulo tumbled to 15.36 reais. Both companies are based in Sao Paulo.

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