Furnas, a subsidiary of Eletrobras, organizes itself to make an injection of resources that, if implemented, will make it a controlling shareholder of the Santo Antônio plant on the eve of the privatization of Eletrobras. The studies necessary to assess the impacts have already been sent.
The request for studies, however, is seen as protocol. The plant needs the contribution to pay for the defeat in an arbitration dispute, but the other shareholders of the business showed no interest. Furnas would be left to take over the operation to avoid the worst.
The total value of the capitalization, already defined at the shareholders’ meeting, is R$ 1.58 billion, the amount necessary to cover the payment of the sentence, according to documentation that the Sheet had access.
In the energy sector, the company’s situation is considered delicate because of the consequences of this dispute.
Currently, Santo Antônio Energia is private. It is an SPE (Specific Purpose Company), controlled by another SPE, Madeira Energia, and has Furnas as a shareholder with 43% of the participation. A capital increase by Furnas would transform it into a state-owned asset on the eve of Eletrobras’ capitalization on the stock exchange.
Those who follow the discussions have heard from interlocutors that the change in ownership would not affect the final value of Eletrobras, given the intricate shareholding structure of Santo Antônio.
Private sector lawyers, heard by the report on the condition that their name not be disclosed, suggest that it is necessary to look at the details of the structure before hitting the hammer.
There is another consideration. Entering into a capital increase, under current conditions, to pay a debt and avoid the financial deterioration of a company that will become its own asset could have the opposite effect, that of reducing the value of the state-owned company. The fact is that a finer analysis would be needed to identify the final effect.
From the aspect of energy generation, it makes a difference. The Eletrobras system has 22 hydroelectric plants, with 26,089.6 MW of installed power. The Santo Antônio hydroelectric plant, located on the Madeira River, headquartered in Porto Velho (RO), has a minimum installed capacity of 3,568.3 MW, almost 14% of the total.
The judgment that defines the last points of Eletrobras’ privatization will be resumed this Wednesday (18) at the TCU (Union Court of Auditors).
Approving the capitalization in the TCU is a priority for the new Minister of Mines and Energy, Adolfo Sachsida. Since the weekend, he has been fully dedicated to the topic, and then forwards other decisions, such as changes in the team. The stock exchange operation, in addition to completing the privatization of an emblematic state-owned company, will guarantee R$ 25 billion in grants.
This Monday (16), Sachsida was at the TCU to meet with ministers. This Tuesday (17), he is expected to return to a meeting with Minister Aroldo Cedraz, rapporteur of the Eletrobras process.
FINANCIAL RISKS IN SANTO ANTÔNIO
Santo Antônio Energia is in the final proceedings of a billion-dollar dispute that is being processed in an international arbitration court. The sentence was handed down, but there was a request for clarification that delayed the outcome. Capitalization, however, seeks not only to help cover the loss, but to prevent a greater evil.
The company has a debt of R$ 18 billion. With the execution of the arbitration payment, the limits of this debt, defined by accounting indicators, would be exceeded, with the risk of leading to the execution of all debts and even reaching the shareholders’ guarantees.
The capital increase avoids the domino effect, the so-called cross default, which has already been discussed internally by the company and is worrying. In this more serious scenario, the chances of the privatization of Eletrobras being concluded within an adequate period to attract investors this year would be buried, according to a financial market analyst who follows the process.
The financial environment is so critical that the auditing firm Ernst & Young has already highlighted that relevant uncertainties could jeopardize the operational continuity of Madeira Energia, parent company of Santo Antônio. The caveat is in the report for the first quarter of 2022 by Cemig, a publicly traded shareholder.
DISPUTE BETWEEN PARTNERS
Arbitration has peculiar details. There are cross-shareholdings between winners and losers.
Odebrecht (18.25% of the parent company) and SAAG Investimentos (10.53%), which has as shareholder Andrade Gutierrez Participações.
The other shareholders of Madeira Energia are Cemig Geração de Transmissão (8.53%) and the Caixa FIP Amazônia Energia fund (19.63%). The FIP is managed by Caixa, and its shareholders are the FI-FGTS, an investment fund created with FGTS resources, and Odebrecht itself.
As Odebrecht and Andrade Gutierrez are awaiting compensation, they show no interest in participating in the capital increase.
The market announcements indicate how the temperature of this discussion has been rising since mid-April.
Eletrobras and Santo Antônio communicated, on April 18, that the construction consortium had requested the partial execution of the arbitration award, as it understood it to be final. However, as the arbitration chamber had received additional requests for clarification from the Santo Antônio side, the judge thought it best to wait before enforcing execution.
Days later, on Monday, April 25, Eletrobras stated in another statement that it was, together with Furnas, “assessing the obligations of shareholders that may arise from the arbitration procedure”, because of “the possible impacts on the specific purpose Santo Antônio Energia, controlled by Madeira Energia, of which Furnas holds 43.06% of the capital stock”.
On Friday of that same week, on April 29, Eletrobras and Santo Antônio reported that a capital increase of R$ 1.58 billion had been approved to “face the impacts arising from the arbitration procedure”.
On May 2, it was Cemig GT’s turn to communicate the capital increase to the market, but the company told investors that it would not participate in the operation.
A week later, on April 9, the president of Furnas was replaced. The lawyer Clóvis Torres, who was leading the privatization process at the subsidiary, left. In his place, Caio Pompeu, financial director of Furnas, took over.
WITHOUT TCU EVALUATION
According to Sheet found out, this topic is not on the TCU ministers’ radar. In the next session of the trial, on Wednesday, the main item under evaluation is the value of the action. It was defined after analysis by consulting firms and remains confidential.
The previous session was suspended after Minister Vital do Rêgo Filho submitted a request for 20-day views, and he will deliver his reviewing vote.
Vital do Rêgo has asked for more calm in the conduct of the analysis process in the Court. In the session on February 15, in the first phase of the trial, Vital do Rêgo questioned the company’s economic-financial model. He pointed out that there was an undervaluation of R$ 46 billion, with future repercussions on the price of electricity. The Court, however, held that there was no correction to be made.
Sought after by the report, Eletrobras and Furnas highlighted that they have disclosed information through notices to the market and will maintain the commitment to provide these clarifications. The Ministry of Mines and Energy did not respond until the publication of this text.
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