‘We are fighting the good fight’, says Petrobras president to executives

Fired this Monday (23) by President Jair Bolsonaro (PL), Petrobras president José Mauro Coelho will remain in office until the shareholders’ meeting that will be convened to consider the appointment of Caio Paes de Andrade to command the state-owned company.

The meeting does not yet have a date set, but at least 30 days are needed between the call and its realization. That is, despite the announcement of his resignation just 40 days after his inauguration, Coelho should still be president of the company until the end of June.

In a message sent this Tuesday (24) to the WhatsApp group that brings together executives in the energy sector, the fired president thanked expressions of support. “Thank you for the message. We work responsibly and seriously, we fight the good fight. We are moving forward”, he said.

In his short term, Coelho defended the fuel price policy and intensified his activities on social networks with arguments about the positive impacts of the company’s strategy for the country. Two weeks ago, he promoted a readjustment of 8.87% in the price of diesel.

The increase took the value of fuel sales to a record at the stations and ended up justifying the resignation of the Minister of Mines and Energy, Bento Albuquerque, but did not cover the entire gap in relation to international quotations at that time.

At the meeting that will evaluate the name of Paes de Andrade, shareholders will still have to elect 8 of the 11 members of the board, who were elected by multiple vote at the meeting that confirmed the appointment of Coelho. Only two minority representatives and the workers’ representative remain.

The government has not yet announced whether it will renew its list, but the market’s expectation is that it will indicate names more aligned with President Bolsonaro, to facilitate possible changes in the company’s fuel price policy.

Financial market analysts see barriers to significant changes in the company’s strategy, but minority representatives already expect at least an attempt to reduce the frequency of readjustments.

VanDyck Silveira, CEO of Trevisan Escola de Negócios, recalls that a similar strategy was used by former president Dilma Rousseff, in a more veiled way, on the eve of the 2014 elections.

In statements to the Federal Public Ministry, the then president of the state-owned company, Graça Foster, said that the company spent the year trying to make adjustments to avoid breaching debt targets, but that the final word belonged to the then Minister of Finance, Guido Mantega.

“The raises, all of them, from my first day to my last day, were by the chairman of the board,” she said in testimony. “He would call me and say ‘3 on diesel and 5 on gas’ and hang up.”

“If the government wants to use its dividends to subsidize fuel, which I think is absurd, it is its right”, says Silveira. “It is a less problematic solution, which generates much less distortions than holding the price. Now, what cannot be done under any circumstances is manipulation.”

A move in this direction, however, will face resistance from private investors, who were enjoying a honeymoon period with the company due to the high dividends distributed by the profits recorded in recent quarters.

They argue that, in order to change its pricing policy, the state-owned company needs to change its statute, which determines financial compensation from the government in the event of loss-making operations to support public policies.

The text says that the Union can only guide the company to assume obligations or responsibilities, including investment projects and assumption of operating costs, such as those related to the sale of fuels by law or contract, with costs and revenues itemized and disclosed in a transparent.

In these cases, the bylaws continue, the obligations must either respect market conditions or provide for compensation by the Federal Government, each fiscal year, for the difference between the defined market conditions and the operating result or economic return of the obligation assumed.

The restrictions were included in the statute during Pedro Parente’s administration, in the Michel Temer government, adapting the text to rules created by the State-owned Companies Law to try to shield public companies from political interference.

Next steps of the change in command of Petrobras

• The company calls a shareholders’ meeting to elect a new board, which must take place within a minimum period of 30 days after the call
• Government and minority shareholders present their candidates for 8 of the 11 vacancies; three of them, elected by separate vote, do not need to be renewed
• After the meeting, with names already approved by the shareholders, a new board of directors meets to appoint the president of the state-owned company.

If you want to change pricing policy

• It is not clear how or if the government will propose a formal change in the company’s pricing policy, but if it does occur, analysts estimate that a change in the bylaws may be necessary to lift restrictions on loss-making operations by determination of the controlling shareholder.
• The change in the bylaws also depends on approval at the shareholders’ meeting.