(Rewrites throughout to update prices add additional Petrobras information, market value)
By Jeb Blount
RIO DE JANEIRO, Oct 27 (Reuters) - Brazil's state-run oil company, Petroleo Brasileiro SA, led a plunge in value of state-run energy firms on Monday as investors bet the re-election of President Dilma Rousseff will mean borrowing costs rise and profits fall.
Preferred shares of Petrobras, as the oil company is known, fell as much as 15 percent at the beginning of trading in Sao Paulo. The stock trimmed losses near mid-day to more than 12 percent, putting the company on track for its biggest one-day fall in nearly five years.
Monday's declines wiped more than $20 billion from the oil company's value, making it worth less than it was before the discovery of giant offshore oil reserves in late 2007. Its market value of about $70 billion on Monday is less than a fifth of its peak of $367 billion in May 2008.
Under Rousseff's predecessor, fellow Workers' Party member Luis Inacio Lula da Silva, oil and energy stocks soared following new offshore oil discoveries and surging commodities prices driven by galloping Chinese demand. Since Rousseff took office in 2011, that commodities boom has ended.
Growth has since been stagnant and oil and electricity production targets have been regularly missed. Energy shares, particularly those of companies under the control of Rousseff's federal government, have erased all or most of the gains racked up under Lula.
"Investors and analysts now appear to be divided over whether they have properly discounted the worst-case scenario," said Christopher Palmer, who manages about $1 billion of Latin American assets for Henderson Global Investors in London.
"That's a very valid question because shares have fallen back to where they were in March before there was any hope President Rousseff would be replaced," he added.
Preferred shares of state-run utility Centrais Eletricas Brasileiras SA, also known as Eletrobras, fell 11.5 percent on Monday in Sao Paulo.
Preferred shares of Centrais Eletricas de Minas Gerais SA , or Cemig, fell 12.4 percent. Cemig is controlled by the state government of Minas Gerais, whose next governor, elected earlier this month, is a member of Rousseff's Workers' Party.
Brazil's IEE index, made up of the most-traded electricity utility stocks on the Sao Paulo stock exchange, fell 5.6 percent, on track for its biggest one-day decline in more than two years. (Additional reporting by Stephen Eisenhammer; Editing by W Simon and Meredith Mazzilli)