The Federal Court of Auditors (TCU) resumes this Tuesday (15) the judgment regarding the capitalization of electrobrasthe largest energy company in Latin America.
The process began in 2021, after the approval of the provisional measure (MP) on the subject in the Congress. However, he was suspended for two months after applying for a visa from Minister Vital do Rêgo.
The TCU is not a body of the Legislature, being independent and autonomous, and its approval is necessary for the measures approved by Congress and the concession contracts for the plants that Eletrobras will continue to operate to take effect.
despite the federal government having already stated that it intends to complete the state-owned company’s capitalization process in 2022, it may be delayed depending on the TCU’s decision on a bonus calculation that Eletrobras will need to pay to the government. If what has already been determined is maintained, the process should be completed this year.
deadlock in the TCU
The court began the judgment on Eletrobras’ capitalization on December 8, 2021. The body’s objective is to assess the sectoral impacts of the capitalization and the effects it will have on the Union and on the country’s energy consumers.
At the time, the rapporteur, Minister Aroldo Cedraz, pointed out flaws in the process, determining adjustments to calculations made by the government for the so-called value added of contracts (VAC).
The VAC estimated by the government was R$ 62.4 billion, but the indicated adjustments reduce the projection to R$ 56.8 billion. This would lead to a decrease in the grant bonus that Eletrobras would have to pay with the renewal of concessions for hydroelectric plantsas well as the amount allocated to the Energy Development Account (CDE), which would increase to R$20.3 billion and R$26.9 billion.
The minister said at the trial that the Ministry of Mines and Energy heeded some of the criticisms made by the court.
However, Minister Vital do Rêgo asked to see the process in order to have more time to examine it, which was granted on December 15th. TCU allowed Eletrobras and the government to proceed with capitalization procedures to avoid delays.
In 2022, however, Vital do Rêgo stated that he found a divergence in Eletrobras’ bonus payment model for the renewal of the hydroelectric concession. Today, at around R$25 billion, the minister said that the energy potential of these plants would also need to be calculated, which could raise the bonus by at least another R$50 billion.
The government contests the proposal on the grounds that there is no regulation of the energy power market in Brazil. If the recalculation proposal were approved by the TCU, the time for the realization could leave the completion of the capitalization for 2023.
On Wednesday (9), the minister of the TCU Jorge Oliveira proposed the resumption of the trial for this Tuesday (15), which was accepted. Now, it will be up to the members of the body to decide whether to accept Vital do Rêgo’s proposal or follow the rapporteur.
According to the policy analyst at CNN Caio Junqueira, the government considers that there is a majority of votes to defeat Vital’s proposal. If that happens, the chance of Eletrobras’ privatization being released this year is high.
The agency also needs to analyze capitalization modeling, which involves offering shares on the stock exchanges in Brazil and United States to pay renewal bonuses for the operation of hydroelectric plants.
Next steps for capitalization
In addition to the TCU vote, another important step towards capitalization will be taken later this month. Eletrobras scheduled for the 22nd the holding an extraordinary general meeting of shareholders to approve the elements of privatization.
Some issues will be voted on as a block, such as the restructuring of the state-owned company to segregate assets from Itaipu Binacional and Eletronuclear, as well as the obligation to make contributions to revitalize hydrographic basins.
For capitalization to occur, it must also be approved by minority shareholders, who already have shares (ELET3 and ELET6) traded on the Brazilian stock exchange, the B3.
If it is approved, it is scheduled for mid-March the completion of the Eletrobras capitalization offer, under the responsibility of the National Bank for Economic and Social Development (BNDES).
In December last year, the government stated that it would be possible to complete the capitalization of the state-owned company in the first four months of 2022 if the TCU authorizes the process. In February 2022, the Minister of Mines and Energy, Bento Albuquerquesaid that trusts in the capitalization of Eletrobras this year.
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Capitalization or privatization?
Eletrobras’ privatization will take place through the so-called capitalization. In it, the government loses the condition of controlling shareholder of the company with the offer of shares to the market. However, it will have the so-called golden share, a “minerva vote” that gives the right to veto measures in discussions that are considered strategic for the country.
The government also has golden shares in companies such as Vale, IRB Brasil and Embraer.
It is a different model from the so-called privatization, in which the government sells the entire company to an owner or consortium, who then have full control of the company.
What will change?
The main change with capitalization is that the private sector will hold most of the share capital, with the consequent control of the company.
The company has 233 generating plants, including 47 hydroelectric, 114 thermal, 2 nuclear, 69 wind and one solar.
Responsible for a third of all energy generation in Brazil, Eletrobras operates from its subsidiaries. Among them are Furnas, Eletrosul, CGTEE, Chefs, Eletronorte, Eletronuclear, Amazonas Energias, Distribuição Acre, Distribuição Piauí, Distribuição Roraima, Distribuição Alagoas and half of the capital of Itaipu Binacional.
Of these, the Itaipu Binacional and Eletronuclear will leave the scope of Eletrobras and will be transferred to Empresa Brasileira de Participações em Energia Nuclear e Binacional (ENBpar), a new state-owned company with a budget of R$ 4 billion
The determination is part of the MP approved in Congress and sanctioned by the president Jair Bolsonaro (PL) in July, with 14 vetoes. Among them, there is the article that determined that the Executive Power take advantage of employees of Eletrobras and its subsidiaries dismissed without just cause during the 12 months following the privatization.
The law will allow privatization to occur by increasing the share capital, with the waiver of the right to subscribe for shares by the Union, which will thus have diluted its 61% stake in the state-owned company.
New electricity generation concessions will also be granted for a period of 30 years and the contracting of thermoelectric generation powered by natural gas through a reserve auction. It is in the calculation of grants that the TCU is deadlocked.
The hydroelectric plants will leave the current quota regime – which only pays for operation and maintenance – to the independent production of energy.
In exchange, the company will need to allocate resources to the Energy Development Account (CDE), in order to alleviate the effects on the electricity bills.
The destination works as a counterpart of the state-owned company for the renewal of hydroelectric contracts under more advantageous conditions by the company, something also provided for in the definitions of the privatization process.
The contracting of thermoelectric generation was pointed out as a measure that can also make the bills more expensive, as it is a more expensive type of energy. She was part of additions to the MP in Congress, which included allocating funds to watershed revitalization.
The government’s calculation is that the capitalization generates BRL 100 billion in the public coffers, with BRL 20 billion from the primary issue for the sale of shares, which will be paid to the treasure from hydroelectric grants, and R$ 80 billion with potential secondary offers.
The government estimates a yield of R$ 60 billion in the state-owned company’s withdrawal process alone – an amount of which the R$ 20 billion for immediate grants are part of. Within this total, R$ 30 billion will later be allocated to the CDE. The remaining R$ 10 billion will go towards investing in the revitalization of basins and rivers in the North and Northeast regions.
Additionally, R$ 25 billion is foreseen for the price reduction of Itaipu, of which R$ 18 billion for the CDE and R$ 7 billion for a poverty reduction fund.
*With information from Reuters and Anna Russi, Larissa Rodrigues, Carla Bridi and Fabricio Julião, from CNN
Source: CNN Brasil
I am Sophia william, author of World Stock Market. I have a degree in journalism from the University of Missouri and I have worked as a reporter for several news websites. I have a passion for writing and informing people about the latest news and events happening in the world. I strive to be accurate and unbiased in my reporting, and I hope to provide readers with valuable information that they can use to make informed decisions.
