UPDATE 2-Brazil's Eletrobras denies plan to break up company

Fri Jan 25, 2013 3:02pm EST

* Globo reported plan to split company into three

* Eletrobras says to keep existing subsidiaries

RIO DE JANEIRO Jan 25 (Reuters) - Brazil's state-controlled utility Centrais Eletricas Brasileiras SA, or Eletrobras , on Friday denied a report that said the government is studying a plan to break up the company as part of a cost-saving strategy.

The O Globo newspaper on Friday reported that the plan suggested Eletrobras' assets would be grouped into separate electricity, generation, transmission and distribution companies.

In a statement emailed to Reuters, an Eletrobras spokesman said the company was ordered by the government to consider options to cut costs, "taking advantage of synergies between its subsidiaries."

"At no moment was the possibility of creating new holdings for (energy) generation, transmission and distribution contemplated," the company said.

Rio de Janeiro-based Eletrobras is expected to lose 8.7 billion reais ($4.3 billion) of revenue a year after agreeing to a government plan to renew expiring hydroelectric dam concessions in exchange for electricity rate cuts of between 18 percent and 32 percent starting this month.

To make up for these losses, Eletrobras expects to cut operating costs and receive new revenue from giant hydroelectric dams being built in Brazil's Amazon region, the paper said.

Eletrobras preferred shares, the company's most-traded class of stock, have lost more than a quarter of their value since early September when the government unveiled the rate-cut plan.

Eletrobras U.S.-traded shares fell 2.8 percent to $3.49 on the New York Stock Exchange on Friday. They lost 67 percent last year. Brazilian stock markets were closed for a Sao Paulo civic holiday.

If the split were to occur, Globo reported, the new companies would probably absorb regional generation and transmission units responsible for about 36 percent of the electricity generation in the country.

Eletrobras denied that, saying that the government, its controlling shareholder, had only asked the company to explore cost cutting on the basis of finding synergies among its existing subsidiaries.

Eletrobras said in December that it plans to release a cost-cutting plan to investors by the end of March.

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