By Gabriel Araujo
SAO PAULO (Reuters) -Shares in Brazilian state-run power company Eletrobras plunged on Wednesday after it reported third-quarter net income of 965 million reais ($175.4 million), down 66% year-on-year, hit mainly by provisions relating to ongoing litigation.
The lawsuits relate to a compulsory energy loan program, which required industrial energy customers to provide money to pay for Brazil's electricity sector.
The government promised to repay the companies but this has been repeatedly postponed.
Centrais Eletricas Brasileiras SA, as the company is formally known, said on Tuesday adjustments in provisions for contingencies totaled 9.43 billion reais in the third quarter. This included a 5.25 billion reais reclassification to "probable" from "remote" for the so-called "compulsory loan on electricity" lawsuits.
Preferred shares in Eletrobras were down 4.5% and ordinary shares dropped 5.1% in morning trading, making it the top loser in the Bovespa index, which rose 0.1%.
Eletrobras, which is expected to be privatized in 2022, said its earnings before interest, taxes, depreciation and amortization (EBITDA) reached 5.6 billion reais, up 4% from a year earlier.
According to the company, the results were positively impacted by a strong operating performance especially in the transmission segment.
Analysts at Credit Suisse (SIX:CSGN) said that Eletrobras' operating figures were positive, but the compulsory loan provisions blurred the scene ahead of the privatisation, noting they could affect the future value of the company.
Net operating revenue totaled 9.96 billion reais, up 50% from a year earlier, positively influenced by effects from a periodic tariff review on its transmission business.
Brazil has been facing its worst drought crisis in 90 years, which has severely affected hydropower generation and led the country to rely more on costly thermoelectric power plants, making electricity more expensive for consumers.
($1 = 5.5028 reais)