Shareholders approve privatization of Eletrobras at meeting

This Tuesday (22) the government took another step in the privatization process of Eletrobras, with the approval of the sale of new shares in the company at a shareholders’ meeting.

The objective is to reduce the Union’s share from 70% to 45% of the capital, making the company a corporation with dispersed capital. The proposal was supported by private shareholders. On the other hand, unions linked to Eletrobras employees protested.

At the meeting, in addition to the corporate restructuring of Eletrobras, which will no longer have state control, the government approved the sale of the company’s shares in Itaipu for R$ 1.2 billion, and the spin-off of Eletronuclear, operator of the Angra dos Reis nuclear plants. .

The two companies will be transferred to a new state-owned company called ENBPar (Empresa Brasileira de Participações em Energia Nuclear e Binacional SA), created specifically for this purpose.

The meeting was even suspended a few times so that company representatives could answer questions from investors about the terms of the transaction. One of the main doubts was precisely about the evaluation of the company’s share in Itaipu.

With the proceeds from the sale of shares, Eletrobras must pay the government, within 30 days, R$ 32 billion referring to the renewal of the concessions of the hydroelectric plants it operates. Another R$ 25.3 billion must be paid for the change in contracts that had already been renewed.

The privatization of Eletrobras is one of the government’s priorities, which is reaching its last year without fulfilling its promise to sell large state-owned companies, such as Correios.

Despite shareholder approval, the workers intend to maintain opposition to the process. “The holding of the shareholders’ meeting to approve the privatization of Eletrobras was a new chapter in the soap opera of violations of legislation, the Constitution and the public interest by the Government, as already vigorously denounced by Minister Vital do Rêgo in the last session of the TCU [Tribunal de Contas da União]”, said Maximiliano Garcez, lawyer for the National Electricity Collective.

Do Rêgo questioned the criteria used to define how much Eletrobras is worth, arguing that a correct assessment would take its price to R$ 130 billion, practically double the value defined by the court, of R$ 67 billion. He was the only one to vote against in the session.

“Such illegalities have been taken to court by the Coletivo Nacional dos Eletricitários, which will continue to defend national sovereignty, to prevent privatization that would cause huge damage to the Brazilian population — either because of the very low value that the Government wants to charge for the sale, or because of the terrible tariff impact. “

The approval of capitalization by the shareholders’ meeting is seen by financial market analysts, who were consulted on the condition that their name was not disclosed, as a decisive advance in the procedures considered technical required in this type of operation.

The next steps include the release of the 2021 results, scheduled for March 14, followed by the annual general meeting, for the approval of the accounts, and the release of the financial report.

These rites comply with the rules required for the publication of the prospectus to investors when shares are offered. In the case of the Eletrobras operation, there is an additional item, a new TCU session.

The estimate is that the court would be ready to vote in late March or early April.

The TCU ministers are going to evaluate the separation of Itaipu and the nuclear plants. They will also debate the minimum share price, calculated by consultants hired by BNDES. This is the most sensitive discussion.

The values ​​are confidential and will not be publicly disclosed.

This step qualifies as the political and sensitive part of the final phase of formatting the capitalization. In this case, there are two very different scenarios in the analysts’ spreadsheets.

If there is no disagreement, these items are approved, and the operation can take place in May. In the worst case scenario, however, a minister could ask for views, pushing the offer to August, a hottest moment of the electoral race, which could even make capitalization unfeasible this year.

The government argues that the process will reduce the electricity bill, by reducing the weight of the CDE on tariffs and minimizing the hydrological risk that consumers today carry.

The MP (provisional measure) that laid the foundations for privatization, however, was approved with several tortoises that, for the industry, will have the opposite effect, such as the mandatory contracting of thermal energy and small hydroelectric plants.

Eletrobras employees tried to suspend the meeting both in court and in the CVM (Securities Commission), but were unsuccessful.

At this Wednesday’s meeting, they voted against the capitalization, claiming that the process does not serve the best interests of the company and generates additional risks.

In addition to not representing an inflow of resources into the company, they say, the proposed model may generate the need for contributions from Eletronuclear to complete the works on the Angra 3 plant, stopped after the start of Operation Lava Jato.

“This privatization clearly shows that the majority shareholder (União) is concerned only with its own interest, ignoring what is best for Eletrobras, ignoring the bad market situation, ignoring the opinion of its stakeholders and ignoring what is best for Eletrobras. Brazilian society”, they conclude.