UPDATE: CTEEP Board Recommends Renewal of Brazil Licenses

--CTEEP board recommends voting for renewal of expiring licenses on higher reimbursements

--Board had previously recommended against renewal

--Shares plunge after decision

(Updates with share price in last paragraph, adds detail.)

By Paulo Winterstein

SAO PAULO--Brazilian electricity transmission company Cia de Transmissao de Energia Eletrica Paulista, or CTEEP (CTPZY, TRPL4.BR), said Monday that its board was now recommending that shareholders vote in favor of renewing operating licenses.

CTEEP, which is convening shareholders for a meeting later Monday to vote on the licenses, had originally recommended that shareholders vote against renewal.

Brazil's government proposed renewing licenses in exchange for lower power prices starting next year. Companies that agreed would write down past investments, being reimbursed by the government for unamortized investments. Utility companies complained the prices and reimbursement levels were too low, and many analysts said that CTEEP would likely operate at a loss with those prices.

The board seemingly agreed, recommending last month that shareholders vote against renewal before the Tuesday deadline to decide.

But Brazil's government last week sweetened the pot a bit, raising the value of reimbursements for generation assets and promising to increase reimbursements for transmission assets.

In a statement Monday, CTEEP cited the recent changes in reimbursement values as the driver behind the board's decision.

Shares plunged 7% in intraday trading after the board announcement.

-Write to Paulo Winterstein at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires