A long-time position in the Fund, Eletrobras (BSP:LIPR3, Financial) is a holding company that operates across the entire electricity value chain. The company is Brazil’s largest electricity provider, controlling 33% of the country’s generation capacity, mainly via hydro plants, and nearly 50% of the transmission grid.
In late April, Brazil’s Ministry of Mines and Energy announced very favorable compensation payment terms for the residual value of transmission assets built prior to 2000 (previously arbitrarily set to zero). The change marked a significant regulatory turnabout for Eletrobras and drove up its shares. The share-price increase, combined with a strong rally for Brazilian securities in general, led us to believe that the risk/reward tradeoff no longer warranted an investment in Eletrobras.
From Brandes' Emerging Markets Fund second quarter 2016 commentary.
