How the PT proposes to reverse the privatization of Eletrobras

With the Eletrobras privatization process nearing completion, the PT is already drawing up plans to try to regain state control of Latin America’s largest electric company in the event of a victory for Luiz Inácio Lula da Silva in the upcoming elections, party members told Reuters. .

But the path to reversing privatization is not simple, in the view of experts.

The initiatives listed by the party go through questioning in the STF (Supreme Federal Court) about weaknesses in the sale process and go up to a possible repurchase of the company’s shares so that the government holds more than 50% of the company.

However, they do not foresee actions that could be characterized as rupture or disrespect for the current legislation, according to representatives of the party heard by the report.

“It is possible to reverse it,” former finance minister Guido Mantega, who headed the portfolio during the PT administrations between 2006 and 2014, told Reuters. the actions.”

In Mantega’s assessment, the first step would be to raise the possibility of a legal challenge to the privatization process. For him, the party should look for “defects and irregularities” that may have been committed, citing questions already raised in the Federal Audit Court in relation to the pricing of the operation.

“The best way is for you to question and overturn this privatization in court, which has several irregularities,” he said.

Senator Jean Paul Prates (PT-RN) has been working, within the Lula campaign, on alternatives that can be used by the party in the event that the sale of the state-owned company is actually carried out. forward.

The senator cites a series of pending issues, called by him “bare wires”, which would bring insecurity to the process, including the impact on electricity bills from the decoupling of the plants – which will open space for the sale of about 40% of the energy consumed in the country at free market prices.

The senator also mentioned the lack of a medium-term impact study on tariffs and issues related to Furnas, Itaipu and Eletronorte that remained unresolved.

“It is not questioning for the sake of questioning. There will be no legal uncertainty. This insecurity already exists with these problems that remain. It is making adjustments to correct defective processes and restore the public interest”, he defended.

When contacted by Reuters, the Ministry of Mines and Energy and the Economy did not respond. Eletrobras said it will not comment.

The government has denied that the privatization of Eletrobras will result in an increase in the energy bill, noting that the project provides for contributions of around R$32.1 billion by Eletrobras to the CDE (Energy Development Account) over several years, offsetting the discotization. In addition, the company should also direct almost R$ 10 billion to the revitalization of hydrographic basins in the next decade.

For Prates, the questioning of Eletrobras’ privatization will take place “in a non-traumatic way”.

“We have to use the same rules of the market. Those that are contestable will be (contested), using the rules of the game. The Brazilian State as a shareholder, majority shareholder or not, will move.

The rules of the privatization process provide for a dilution of the power of the federal government within the company, with the sale of shares until the Union reaches a 45% stake in the common shares and loses control of the company.

In the group that works with Lula’s government plan, the buyback of shares is one of the possibilities considered, as admitted by Prates and Mantega. But there is no decision made. It is necessary, they say, to analyze the scenario in case the ex-president is elected.

DIFFICULT TO REVERSE

An eventual reversal of Eletrobras’ privatization is possible in theory, but very difficult to be operationalized in practice, in the opinion of João Reis, a lawyer at Machado Meyer, specialized in the area of ​​litigation.

“I also find it complicated to come to a political decision to return to Eletrobras as an entity of public administration”, he said, pointing out fiscal difficulties that the country faces.

The president of Amec (Association of Investors in the Capital Market), Fábio Coelho, observed that the privatization model already provides for rules that would practically make such a move by the government unfeasible.

One of the so-called “poison pills” —rules normally placed to protect minority shareholders— of Eletrobras determines that anyone who holds more than 30% of the shares would have to pay a premium of 100% over the average value of the company’s common shares. “It is very expensive, almost economically unfeasible… And if you want to buy more than 50% of the company, you have a premium of 200%”, he added.

The PT has already tried to suspend privatization in court, without success. In April and May, parliamentarians from the party and other opposition acronyms filed lawsuits, including in the STF, to stop the process. So far, the requests have not prospered.

ENERGY INSECURITY

Part of Lula’s government plan is the idea that a future government needs to work with shareholders in state-owned companies, but with a specific profile. The view is that the investor in Brazilian state-owned companies – and this goes for Eletrobras and Petrobras – cannot be a daytrader, someone who speculates with shares and expects a quick return.

“State companies will have to be seen as a long-term, valued conservative investment for the pension funds of Quebec schoolteachers and New York postmen. is not a startup,” Prates said.

PT president, deputy Gleisi Hoffmann, said that the government’s loss of control of Eletrobras will bring energy insecurity and increase in tariffs, in addition to disrupting investments in infrastructure and social policies. For her, the speed of privatization carried out by the Jair Bolsonaro government makes the operation unsafe for investors from legal, economic and political aspects.

“The way it is being conducted, with undervaluation of assets, violations of bidding processes and other procedures, this privatization constitutes a real deal”, he said, adding that he sees the Bolsonaro government illegitimate to conduct this process at the end of its term.

Lula took more than one stand against the privatization of Eletrobras, criticized the sale in an election year and even said that whoever bought the company would regret it.

“For businessmen who have sense, it is important to count to ten before making the madness of buying Eletrobrás at a bargain price,” he said in an interview with a radio station in Minas Gerais.

“Privatizing Eletrobras is to hand over this priceless patrimony hard built by the Brazilian people on a platter,” he said in May on social media.

Lula has been leading the polls for voting intentions for the October elections. A Datafolha survey showed that the PT had a 21-point advantage over President Jair Bolsonaro (PL), with 48% of voters’ preference, while the current president has 27% of voting intentions.

The privatization of the state-owned energy company has already received approval from Congress and was approved by the TCU (Union Court of Auditors) in May. At the end of last month, the company launched the stock offering to complete the capitalization, which is scheduled for pricing on June 9.

With additional reporting by Letícia Fucuchima