June 10, 2016 / 6:57 PM / 2 years ago

UPDATE 1-Brazil reviewing size, scope of 'unsustainable' Eletrobras

(Adds minister quotes, information on Eletrobras financial situation)

SAO PAULO, June 10 (Reuters) - The Brazilian government is reviewing the size and business scope of Centrais Elétricas Brasileiras SA, because the current financial and operational situation of state-controlled power holding company looks “unsustainable,” Mines and Energy Minister Fernando Coelho said on Friday.

Coelho said Eletrobras, as the company is known, should put on the block some power distribution subsidiaries, transmission lines and minority stakes in several hydropower plants. Eletrobras will keep essential assets, he said without elaborating.

His remarks comes days after Reuters reported that the government was considering disposing of controlling stakes in some units including Furnas Centrais Elétricas SA and Eletrosul Centrais Elétricas SA, which manage some of Brazil’s largest dams.

“We do not intend to carry out a fire sale of Eletrobras assets,” Coelho told reporters at the sidelines of a meeting in São Paulo. “However, there is indeed an intention to redefine the size and scope of the company.”

Asset sales and a redefinition of the company’s priorities have been touted as solutions to help reduce Eletrobras’ total debt load of 40 billion reais ($11.6 billion), according to several officials. Eletrobras has failed to post an annual profit since 2012.

The company has suffered since President Dilma Rousseff renegotiated operating licenses for electricity companies four years ago, a move that cut the revenue of several Eletrobras subsidiaries. The action aimed to cut electricity rates and entitled affected companies to compensation that never came.

Eletrobras is owed about 30 billion reais in compensation. The company has not been repaid partly because the federal government is currently struggling with a record budget deficit.

Officials from the Planning Ministry and state development bank BNDES are conducting a thorough analysis of the situation of Eletrobras, Coelho said. He said the government needs to avoid frequent interference in the nation’s electricity market.

Besides having a heavy debt burden and slumping revenue, Eletrobras could be delisted from the New York Stock Exchange for failing to present annual financial information.

$1 = 3.4312 Brazilian reais Reporting by Luciano Costa; Additional reporting and writing by Marcelo Teixeira; Editing by Chizu Nomiyama and Steve Orlofsky

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