Calculation used for privatization of Eletrobras can raise costs to consumers

The calculation of the physical guarantees of the Eletrobras plants carried out for the privatization of the state-owned company has the potential to harm hydroelectric generators and raise costs to consumers, while benefiting the government with higher payment of grants in the process, companies and an entity of the electricity sector.

The subject is delicate, as it refers to one of the main mechanisms in the electricity sector, and has also been monitored by the Federal Court of Accounts (TCU), which still needs to give its approval to the privatization of the state-owned company.

There are those who believe that the recalculation, if required, could delay the operation’s schedule, but there is no consensus.

At a public meeting this Friday, executives from Engie Brasil, the largest generator of private capital in the country, defended a revision of the figures presented for the renewal of Eletrobras concessions.

“I think the government fully understands that it needs to make this change. The TCU even recommends that this recalculation be done with more up-to-date data,” said the president of Engie Brasil, Eduardo Sattamini.

In Engie’s assessment, the physical guarantees were overestimated, since the account did not consider more recent data on the projects’ flows, consultative uses of water, among others, in the years 2020 and 2021, a period of water crisis.

According to an executive from the electricity sector who is participating in discussions on the topic, the physical guarantees for the privatization of Eletrobras would have been overestimated by almost 2.5 gigawatts (GW) —the calculated value is 12.4 GW average—, which corresponds to an additional revenue of R$ 15 billion to R$ 20 billion in 30 years, brought to present value.

“It is a problem for investors, because they are going to participate in an operation based on a wrong assessment, which will have to be adjusted later on,” says the source, who asked not to be identified.

The grant bonus to be charged in the operation was estimated at R$23.2 billion. This value is being evaluated by TCU.

According to what was reported by TCU, the calculation carried out by the EPE (Energy Research Company) for the physical guarantees of Eletrobras did not consider the updating of important premises, mainly due to the unavailability of data that should be provided by ANA (National Water and Agency). Basic sanitation).

The physical guarantee of a plant corresponds to the physical ballast that determines how much of its energy can be sold. Using outdated data to calculate it when renewing contracts means that Eletrobras could have more energy to sell than it has the capacity to deliver.

As a result, other participants in the Energy Reallocation Mechanism (MRE) would be harmed — the “condominium” of hydroelectric plants, in which the greater production of some plants offsets an eventual lower result from others.

Another group that would be affected are energy consumers, who would have to pay for the new risk to be priced by the generators, in addition to an eventual contracting of reserve energy by the government to cover the system’s deficit.

The extra bill for large energy consumers in the free market can reach R$ 400 million per year, according to Abrace (Association of Large Industrial Consumers of Energy and Free Consumers).

“These values ​​come from the pricing by other hydraulic generators to subsidize Eletrobras and the possible contracting of reserve energy to balance the system. It is a cost that worries the industry”, explains the president of the entity, Paulo Pedrosa.

In a report by the TCU, which Reuters had access to, the technical area of ​​the court emphasizes that the problem of overestimation of the physical guarantees of several hydroelectric plants is known to the sector, producing systemic consequences.

The unit failed to propose a solution to the issue as it understood that the recalculation goes beyond the scope of its analysis and that “it could demand a period incompatible with the Eletrobras privatization schedule”.

The Public Prosecutor’s Office with the TCU opined that the court should recommend to the Ministry of Mines and Energy and to the EPE that they consider updated values ​​in the computation of Eletrobras’ guarantees.

“We believe that this is still possible without compromising the capitalization process. In a scenario where this is not done, there has to be another way to mitigate the damage for the MRE agents”, said Marcos Keller, Engie’s regulation and market director Brazil, during an event with investors.

The government is waiting for a position from TCU to proceed with the capitalization of the state-owned company. The court’s first analysis was scheduled for this Wednesday, but the topic ended up being excluded from the agenda at the last minute because of “manifestations coming from the Executive Branch and society”, said the rapporteur, Minister Aroldo Cedraz. The forecast is for the process to be based on the meeting on the 15th, said Cedraz.

When contacted, the Ministry of Mines and Energy stated that the data used to calculate the physical guarantee of Eletrobras’ hydroelectric plants were the most up-to-date available at the time. According to the folder, there is no question of revising the amounts published in Ordinance No. 544/2021.

“The Review of Physical Guarantees established in Ordinance No. 544/2021 for Eletrobras’ hydroelectric plants greatly contributes to improving the Energy Reallocation Mechanism (MRE), reducing the hydrological risk (GSF) for all generators and consumers of electricity of Brazil,” said the ministry, in a statement.

TCU was contacted but did not comment immediately. Eletrobras preferred not to comment.