Eletrobras Faces U.S. Delisting as It Assesses Graft Losses

  • SEC has set May 18 deadline to file long-delayed 2014 figures
  • Company is struggling to put pricetag on graft losses

Centrais Eletricas Brasileiras SA, the Brazilian state-run utility ensnared in the nation’s sweeping corruption investigation, said its U.S.-traded shares are at risk of being delisted because it still can’t put a price-tag on losses it had from graft.

Eletrobras, which has delayed its 2014 annual report to the U.S. Securities and Exchange Commission three times already, said it doesn’t yet know if it will meet its next deadline to submit the documents on May 18, according to a statement sent to Brazil’s securities regulator late Wednesday. The company’s internal investigation into corruption allegations uncovered as part of a federal criminal probe aren’t yet complete, it said.

KPMG LLP has refused to approve the 2014 full annual report until the utility known as Eletrobras can say what losses the company had after builders on several key projects admitted to inflating contracts and paying kickbacks, a person close to the matter said last month. The company has repeatedly declined to comment on the report.

Eletrobras’s American depositary receipts fell 2.2 percent as of 10:19 a.m. in New York trading, and the Brazilian shares slid 1.2 percent.

It comes a little more than a year after another state-run giant, the oil producer known as Petrobras, said corruption cost it $2.1 billion after Brazilian federal investigators uncovered a pay-to-play scheme involving Brazil’s biggest builders, lucrative public works contracts and politicians. Petrobras and Eletrobras used many of the same construction firms, including Andrade Gutierrez. Executives of the company in testimony in March described kickbacks in exchange for contracts at Eletrobras’s Angra nuclear plant and the Belo Monte hydropower dam.

To put a price-tag on the losses, the utility hired a team led by British-American law firm Hogan Lovells and Brazilian firm WFaria Advogados. Eletrobras said in a separate statement late Wednesday that in its Brazilian financial report, it had a loss of 3.9 billion reais ($1.1 billion) in the first quarter after posting a 2.9 billion-real provision for “legal contingencies.”

Eletrobras said it’s in talks with the SEC to file both its 2014 and 2015 statements to avoid its American depositary receipts from being delisted from the New York Stock Exchange.

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