UPDATE 1-Brazil to sell Eletrobras control in boldest privatization yet

(Adds timeline, market value)

SAO PAULO/BRASILIA, Aug 21 (Reuters) - Brazil's Mines and Energy Ministry will propose President Michel Temer to exit control of power holding company Centrais Elétricas Brasileiras SA, the boldest move yet by a government struggling to close a swelling budget deficit and heed calls to fight widespread corruption.

In a Monday statement, the ministry said it told Eletrobras of the plan, which will be sent to Temer's council for state asset sales. While both the privatization model and terms are yet to be decided, the Brazilian government will keep a right to veto some strategic decisions, the statement added.

Given that Eletrobras is listed in São Paulo, New York and Madrid and has a significant number of non-government shareholders, the plan "demands careful analysis," the statement said. By selling control to private investors, the utility will lure capital more easily, undertaking capital spending without the "limits that state companies often face," it added.

The proposal to sell control of Eletrobras will be made at the council's Wednesday meeting, a person with direct knowledge of the plan said on Monday.

With a market value nearing 30 billion reais ($9.5 billion) and the government owning an over 80-percent voting stake, Eletrobras has for years struggled with high debt, operational strains and a subpar capacity to invest. Eletrobras's enterprise value is just a fraction of that of a list of seven peers tracked by Thomson Reuters.

The Rio de Janeiro-based utility is one of the state-controlled companies involved in a series of massive corruption scandals, and has for years been a key source of politically appointed jobs.

Before Temer, privatizations were often shunned as an option for governments in Brazil unless the country faced serious fiscal strains. A steadfast sale is key to help Temer close a widening budget gap and avert another debt rating downgrade within the next year, analysts said.

"This type of privatization, which is a sale of control, tends to be faster because markets decide what's the best and fairest price for the asset," Deputy Mining Minister Paulo Pedrosa said in Brasilia.

This year, the government endorsed a plan by a series of state-controlled entities dissolved Vale SA's controlling bloc. The move will allow the world's No. 1 iron ore producer to become a company with dispersed share ownership and eliminate any state meddling in its decisions.

($1 = 3.1640 reais) (Reporting by Guillermo Parra-Bernal; editing by Diane Craft and Lisa Shumaker)