Eletrobras Leads Bovespa as Recovery Plan Buoys Prospects

Centrais Eletricas Brasileiras SA, 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 16 percent to 12.70 reais at the close of trading in Sao Paulo, the biggest advance since Nov. 30. The stock was the best performer on the benchmark Bovespa index, which rose 0.6 percent.

Investors see the profitability 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 holders 1.63 real per preferred share in April, the company said in a filing yesterday. The company will invest as much as 52.4 billion reais ($26 billion) through 2017 as part of its turnaround plan. 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 change 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.