SAO PAULO/RIO DE JANEIRO (Reuters) - Shares of Brazil’s biggest utility, Centrais Elétricas Brasileiras SA (ELET6.SA), fell more than 8 percent in Sao Paulo on Friday after news of a shakeup at the Mines and Energy Ministry that could threaten a government plan to privatize the company.
The decline in shares of Eletrobras, as the company is known, wiped nearly $1 billion off its market capitalization.
Paulo Pedrosa, second in charge at the ministry, decided to step down from his post, a source familiar with the decision told Reuters, adding to upheaval on the day that Minister Fernando Coelho Filho is stepping down to run for the Congress.
Pedrosa, an experienced technocrat, had been seen as a likely replacement for Coelho Filho, according to analysts. He has been leading efforts to overhaul electricity sector rules and played a key role in government plans to privatize state-controlled Eletrobras.
Gustavo Miele, an analyst with the equity research team at investment bank Itau BBA, said Pedrosa’s departure was negative.
“We believe that Mr. Pedrosa would be one of the best names to replace Mr. Coelho Filho in the Ministry of Mines and Energy,” he said in a note.
“The announcement has a relevant impact on Eletrobras’ capitalization. We believe that this process strongly depends, among other points, on a pro-market name taking over the ministry,” Miele said in a note to clients.
The ministry later confirmed that Pedrosa was leaving.
Fernando Coelho Filho is one of a dozen cabinet ministers who are leaving the government to run in the October general election.
Coelho Filho had brought Pedrosa and a team of officials with technical profiles to the ministry, many with experience in private-sector power companies, which improved investors’ outlook for the sector.
Another source told Reuters on Friday that Moreira Franco, the secretary of the presidency and a leading figure in the governing Brazilian Democratic Movement party, is a top candidate to take over the ministry.
The Eletrobras privatization has faced opposition from several politicians, including members of the MDB, and the prospect of a person with a strong political profile taking over the energy post is seen as negative by investors.
Additional reporting by Paula Laier; Writing by Ana Mano and Marcelo Teixeira; Editing by Brad Haynes, Dan Grebler and Tom Brown