* Regulator says reviewing compensation under new contracts
* Eletrobras shares up despite top shareholder's sale
* Official sees "marginal" changes to terms of renewals
By Roberta Vilas Boas and Leonardo Goy
CAMPINAS/BRASILIA, Nov 27 Brazil showed some flexibility in its aggressive efforts to slash electric bills on Tuesday, agreeing to review how much it will pay certain utilities to renegotiate their concessions.
The prospect of greater compensation for prior investments under the new contracts lifted some shares in the sector, but officials said any changes were likely to be small and the government was holding the line on steep cuts to power rates moving forward.
President Dilma Rousseff has offered to extend leases expiring between 2015 and 2017 if power companies agree to a sharply lower electric rates, which are among the highest in the world. Companies are challenging the terms, complaining of inadequate compensation for investments they have made.
The head of power regulator Aneel, Nelson Hubner, told reporters on Tuesday that the agency would review compensation for the Tres Irmaos hydro plant run by Companhia Energetica de Sao Paulo, or CESP, due to a prior calculating error.
"Wherever there are differences, we will correct them. Tres Irmaos has a big difference. Others don't," Hubner said.
The government had offered CESP compensation of nearly 1 billion reais ($480 million) for the Tres Irmaos investment, assuming that it entered service in 1982 when it actually began generation in 1992, Hubner said.
Still, any changes to such indemnifications under renegotiated contracts will be "marginal," deputy energy minister Marcio Zimmermann told reporters in Brasilia. He added that the government still sees no room to reduce the scale of rate cuts.
Preferred shares of electric utilities Centrais Eletricas Brasileiras SA, known as Eletrobras, rose 3.4 percent and Companhia de Transmissao de Energia Eletrica Paulista , or CTEEP, gained 1.8 percent on Tuesday.
Zimmermann's comments tempered earlier gains of 6 percent for Eletrobras and CTEEP, while CESP, after gaining in earlier trading, fell 6 percent.
SHAREHOLDER CUTS ELETROBRAS STAKE
Investors welcomed the signs of flexibility from the government, according to Guilherme Sand, a partner with Zenith Asset Management in Porto Alegre, but the sector's gains were limited by doubts of any major changes to the new concessions.
Preferred shares of state-controlled Eletrobras, its most widely traded stock, have fallen nearly 70 percent so far this year but led gains in the sector on Tuesday despite news that its largest private shareholder was paring back its stake.
Norwegian mutual fund manager Skagen sold 278,900 preferred shares of Eletrobras, it said in a Tuesday securities filing, reducing its stake to 14.82 percent from 15.22 percent. The transaction had a trade date of Nov. 26 and a settlement date of Nov. 29, Skagen said.
Eletrobras shares gained for the third straight day on Tuesday, after a 47-percent drop over the prior five sessions.