April 29 (Bloomberg) -- Centrais Eletricas Brasileiras SA, Latin America’s largest utility, is seeking to convert 4.7 billion reais ($2.7 billion) of liabilities to the Brazil’s government into shares, the finance chief said.
Eletrobras, as the state-controlled utility is known, would save 450 million reais a year should the government exercise its right to convert the debt into stock, Chief Financial Officer Armando Casado said April 27 in an interview in Brasilia. The move would cut the interest payments on the debt, he said.
“If Eletrobras manages to do that, it is positive news because by cutting expenses, you boost profit and dividends,” Marcos Severine, an analyst with Sao Paulo-based Itau Unibanco Holding SA, said yesterday in a telephone interview. Severine rates the company an “outperform.”
Rio de Janeiro-based Eletrobras, through subsidiary Cia. Hidro Eletrica do Sao Francisco, or Chesf, led a group that won the rights to build and operate the Belo Monte hydroelectric dam in the Amazon region. The group has said it will seek financing for 80 percent of the 19 billion-real ($11 billion) project from Brazil’s national development bank, known as BNDES.
Brazilian President Luiz Inacio Lula da Silva issued a decree on April 26 allowing the government to swap debt reserves in state-controlled companies for stock without seeking congressional approval. Eletrobras’s debt to the government comes from previous acquisitions of utilities.
Eletrobras rose 29 centavos, or 1 percent, to 30.75 reais at 12:32 p.m. in Sao Paulo trading. The stock has climbed 7.6 percent in the past year, less than the 44 percent gain for Brazil’s benchmark Bovespa index.
--Editors: Jessica Brice, Dale Crofts.To contact the reporters on this story: Arnaldo Galvao in Brasilia at agalvao1@bloomberg.net; Lucia Kassai in Sao Paulo at lkassai@bloomberg.net
To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net
April 29, 2010, 12:12 PM EDT
Eletrobras May Swap $2.7 Billion of Debt for Shares
