TCU must approve Eletrobras privatization process

The TCU (Union Court of Auditors) should approve, this Wednesday (18), the privatization process of Eletrobras, paralyzed for almost a month by a request for an inspection by Minister Vital do Rêgo.

Although Vital is expected to present a dissenting vote proposing further steps — which would delay the process and could eliminate the chance of the operation going ahead this year — he is unlikely to win a majority, according to people taking part in discussions in ministers’ cabinets.

heard by Sheet under anonymity, three ministers stated that there is already a consensus around the proposal reported by minister Aroldo Cedraz. The expectation on the side of the government and the company is also for approval.

There were also rumors that a new request for a view could be made before Vital do Rêgo’s vote.

In short, he will disagree on how the provisions made by the company reduced dividends paid to the Federal Government – ​​a primary concern of the analysis in the TCU, a plenary that tries to avoid losses and damages to the Federal Government.

Court technicians claim that, in fact, Eletrobras increased its provisioning (a kind of reserve to settle possible pending issues, such as lawsuits) from R$17 billion to R$26 billion until the third quarter of last year, which reduced profit company accounting. As a result, shareholder dividends fell.

Vital proposes that this profit be returned if, after privatization, this “mattress” is not spent, which would be a loss for the Union.

In privatization, the Union wants to reduce its participation from the current 72% to around 45%. It is expected to generate R$ 25 billion in grants paid in cash to the Union, a deposit of R$ 32 billion in installments over five years to the CDE (Energy Development Account) responsible for reducing electricity bills, and investments in expanding maintenance of the São Francisco river basin.

According to ministers, Vital tries to convince his colleagues to modify the proposal, providing a kind of hedge (protection) against this possible loss.

The ministers resist because any change may require a new analysis by a minister, increasing the chance of a request for a view.

At this point, a request for a review would postpone the final analysis of the process for the next government. However, the chances for approval are high.

Last week, government representatives made a tour of the TCU ministers’ offices to “smooth out edges” and, this week, meetings with the TCU continued.

Despite still waiting for the final approval of the controlling body, the government is already planning the next steps of the process — the registration of the process with the CVM (Securities and Exchange Commission) and the SEC (Securities and Exchange Commission, the American CVM).

Minister Paulo Guedes (Economy) does not want to waste time and is racing against the clock to try to make the operation viable this semester, before the window of opportunity on the Stock Exchange closes.

Despite adverse market conditions, the government still hopes to make it happen. The interpretation is that Eletrobras is valuable and that it can generate good results in the medium term if it is well managed.

For the company and the government, privatization could still happen in a window that closes in mid-August.

However, market conditions in 2022 are recognized by these people as the main risk of the process. As the operation will be carried out on the Stock Exchange, the approximation of the electoral calendar tends to increase tension between investors and may, consequently, make the operation unfeasible.

The more time passes, the greater the risk of turmoil. In the economic team, doubts are expressed about the real viability of the process this year — although the final word is that the process has a chance to advance.

News of an SEC indictment about the company’s alleged failure to address the scale of the financial risks it faces from the Santo Antônio Dam could affect the pricing that investors calculate for the company, company sources say. But not to the point of definitively removing interest in the company.

Three civil servants from the state-owned company, AEEL (Association of Eletrobras Employees), ASEF (Association of Furnas Employees) and CNE (Coletivo Nacional dos Eletricitários) signed the complaint to the SEC.

In their opinion, Eletrobras delays the disclosure of sensitive financial details about Santo Antônio in an attempt to speed up the timetable for its privatization, even if this imposes losses on the company and its shareholders.

Fábio Pupo and Nathalia Garcia collaborated.