Eletrobras Rises on $1.7 Billion Dividend Payout Deal

Aug. 21 (Bloomberg) — Centrais Eletricas Brasileiras SA, Latin America\’s largest utility, rose the most in two weeks in Sao Paulo trading after the company said it will pay more than $1 billion in dividends owed to shareholders since the 1970s.

The company\’s voting shares, entitled to dividends, gained 3 percent to 29.4 reais in Sao Paulo trading. They earlier surged 11 percent, the biggest increase since May 30. The preferred shares lost 0.6 percent to 24.31 reais.

The state-controlled utility known as Eletrobras confirmed a Valor Economico report it will pay 2.8 billion reais ($1.73 billion) of dividends in cash.

Eletrobras also said it will issue about 5.7 billion reais in new shares to pay off roughly 8.5 billion reais in dividends. The company is in the final stage of discussions with the majority shareholder, the National Treasury, and can\’t confirm when the dividend will be paid, a Rio de Janeiro-based spokeswoman, who declined to be named, said in a phone interview.

The payments may be made by September, Valor reported, citing the company\’s chief financial officer Astrogildo Quental. The agreement needs to be ratified in a board meeting on Aug. 29, the newspaper said.

Eletrobras delayed the payment of dividends because it didn\’t have enough cash to pay them. Dollar-denominated accounts receivable from its Itaipu hydroelectric dam weren\’t paid, resulting in on-the-books profit that didn\’t correspond to actual income, the spokeswoman said.

The dividend payments will be very positive\’\’ for the common shares, UBS AG analysts said today.

At market price, it would imply a dividend yield of about 35 percent\’\’ for common shares, analyst Eduardo Haiama wrote in a note to clients.

To contact the reporters on this story: Telma Marotto in Sao Paulo at tmarotto1@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.

Last Updated: August 21, 2008 16:21 EDT