Eletrobras hopes to complete privatization in April

The president of Eletrobras, Rodrigo Limp, said this Wednesday (17) that he hopes to conclude the privatization process of the state-owned company in April. In a teleconference to detail the balance of the third quarter, analysts expressed concerns about the deadline for analysis by the TCU (Tribunal de Contas da União).

According to Limp, the current schedule provides for completion by May, but the company believes that in April the operation would take advantage of a good window for share trading. The idea is to launch new shares for sale only to private investors, reducing the state’s share in the company.

The operation still depends on approval by the TCU plenary, which should have its last meeting this year on December 8th. If the process is not considered or there is a request for a review by one of the court ministers, the assessment would only take place in 2022.

Limp stated, however, that he has been talking to the process’ rapporteur, TCU minister Aroldo Cedraz, with other ministers and with the court’s technical area to answer questions and streamline the voting process in the plenary.

At this stage, the TCU analyzes the grant amounts of the state-owned hydroelectric plants and the amount that the company must transfer to the CDE (Economic Development Account), a measure that aims to contain the rise in the electricity bill.

The privatization of Eletrobras was approved in June by Congress as part of the government’s effort to reverse the damages of President Jair Bolsonaro’s (non-party) intervention in Petrobras in the market, when he changed the company’s command amid complaints about fuel prices .

The law that authorized the sale of shares in the state-owned company ended up filled with tortoises that, according to large energy consumers and consumer protection entities, will put pressure on the electricity bill for years to come.

The possibility of missing the deadline for the operation was one of the main concerns of analysts in this Wednesday’s conference call. Limp explained, however, that there are no legal impediments for the operation to be carried out later, even in an election year.

“We can carry out the operation at any time, it is approved by law,” he said. “But, depending on how the electoral scenario is, there may be greater volatility in the market, which affects the environment for trading shares.”

The deadline until May considers that the operation will be carried out based on data from the company’s annual balance sheet. If it is not completed by then, it will have to wait for the release of the balance sheet for the first quarter, postponing the offering of shares until July.

On Tuesday (16), Eletrobras announced the result for the third quarter of 2020, when it had a profit of R$965 million, a drop of 66% compared to the same period of the previous year. The result was strongly impacted by the increase in provisions for losses in lawsuits.

Without the provisions and non-recurring effects, says the state-owned company, the profit for the quarter would have been BRL 3.6 billion, 69% higher than that registered in the third quarter of 2020. On the balance sheet, the company stated that “recurring growth demonstrates the improvement in the operational performance of the company”.

In the quarter, Eletrobras raised by R$ 9 billion the provisions for losses in lawsuits against the rate charged on the electricity bill of large consumers until the 1990s. The increase, says the state-owned company, reflects the evolution of some processes for the execution phase.

The provisions refer to the so-called compulsory loans, which began to be collected from large consumers in 1978. Currently, there are thousands of lawsuits questioning the value of the reimbursement, which was made in company shares.

Provisions for legal losses also worried the market, which was surprised by the value announced by the company. Limp stated that the decision complied with analyzes by the company’s legal department based on recent court decisions and reports.

According to him, the amount provisioned currently reflects “the company’s better perception of the risk forecast for our compulsory liabilities” and that he does not expect new large provisions in the future. “We believe that with the revisions we’ve made, future provisions will be mitigated.”