TCU judges last stage of the operation

The Federal Audit Court (TCU) scheduled for this Wednesday (20th) the judgment of the second stage – and the last one under analysis by the Court – of the privatization of Eletrobras. If the operation is approved, it will be one more step towards what could be the biggest privatization of the government of Jair Bolsonaro (PL). Planalto expects to move more than R$ 100 billion with the privatization operation.

So far, the government has managed to sell only one state-owned company under direct control of the Union: Companhia de Docas do Espírito Santo (Codesa), which manages the ports of Vitória and Barra do Riacho (ES).

The government’s expectation is to complete the sale by May 13, but the deadline is threatened by a possible request from Minister Vital do Rêgo, who would postpone the conclusion of the TCU trial. Some analysts see a risk that a major delay will substantially compromise the privatization schedule and, at the limit, make the operation unfeasible in the year 2022.

In general, ministers usually use the 60 regimental days in requests to view, but the Planalto tries, behind the scenes, to negotiate to reduce the period to just seven days. The definition of the limit is made collectively, in a vote of the ministers of the TCU.

The ministers could use paragraph 3 of article 112 of the court’s internal regulations, which states that, “exceptionally, depending on the nature and complexity of the matter, the collegiate body may, at the request of any judge, set a different deadline for the reinclusion of the process in question, which cannot exceed 60 (sixty) days”.

Rêgo had already asked for a view during the analysis of the first stage of privatization, pointing, among other things, to an alleged billion-dollar underestimation of the grant. He suggested, at the time, that Eletrobras be sold for R$ 130.4 billion, about double the R$ 67 billion estimated by the Ministry of Mines and Energy (MME).

The magistrate suggested to the plenary that the process be paralyzed and returned to the government to update the calculations. Despite the arguments he presented, the ministers decided to keep the original value and proceed with the process.

Minister Aroldo Cedraz is the rapporteur of the process in the court, whose endorsement gives legal certainty to interested parties and is considered essential to reduce the chances of judicialization of the sale process.

Window for privatization and consequences with the interruption of the process

The window until May 13 is considered ideal by the government, in view of the elections and a possible loss of interest from investors. “It’s a solution built by the TCU for two and a half years. How can it try to smear this privatization? If we miss this window, we’re going to an obscure future, because the electoral agenda comes in. If the war gets worse, we lose R$ 5 billion of the capitalization of nuclear energy, R$ 30 billion of reasonable tariffs”, said minister Paulo Guedes at an event in Planalto.

In addition to the approval of the TCU, Planalto still depends on the publication of the balance sheet for the 1st quarter of 2022 and the publication of a form required by the American capital market regulator – both scheduled for the end of April, according to the website ” Power360″.

For the Minister of Economy, if privatization is not carried out, Brazil’s energy security will be “at stake”. “If Brazil grows as we expect in the coming years, at a strong growth rate, Eletrobras will not only put itself at risk, but will also jeopardize the future of Brazilian energy security,” Guedes said at the event “Public Dialogue: Capitalization Model of Eletrobras”, carried out by the Federal Audit Court (TCU).

At the same event, the president of the National Bank for Economic and Social Development (BNDES), Gustavo Montezano, said that the non-privatization of Eletrobras could also increase the chances of the Angra 3 nuclear power plant not being completed. “The company [Eletrobras] and Brazilian society may have to bear the costs of closing Angra 3”, he said.

In addition, if privatization is not carried out, the renewal of the concession for the Tucuruí hydroelectric plant, which expires in 2024, could be jeopardized.

This Monday (18), federal deputies from the Workers’ Party filed lawsuits in the TCU itself and in the Federal Court of Brasília asking for the suspension of the Eletrobras privatization process.

What are the next steps in the privatization of Eletrobras?

The second and final stage of the Eletrobras privatization judgment concerns the modeling for the issuance of new shares and the dilution of the state-owned company’s capital. Under the model envisaged, the current shareholders will have their capital diluted and the federal government, which currently holds 51% of the shares, will lose its controlling shareholder position.

That is, new shares of the company will be sold on B3, the Brazilian stock exchange, but the Union will not buy them. Thus, at the same time that the government’s share is diluted to the point of losing its controlling shareholder position, the company’s cash receives new resources, and more investments can be made.

On the other hand, the Union will be entitled to a golden share, a special class action that grants you the power to veto decisions at the shareholders’ meeting. It is forbidden for any shareholder or group to have a stake greater than 10% in the company’s capital stock.

If approved by the Court of Auditors, the privatization of Eletrobras will still depend on the approval of the Securities and Exchange Commission (CVM). Finally, as provided for in the capitalization model, the public notice should be launched with the issuance of new common shares on B3. According to the newspaper “Valor Econômico”, the government works with a minimum price between R$ 25 and R$ 30 per share for the offer.

The capitalization model also allows workers to buy company shares using FGTS funds. Up to R$6 billion in resources from the entire Fund may be used in privatization. The minimum investment allowed will be R$ 200, and the worker may not use more than 50% of his balance in the operation. The purchase will be made through Privatization Mutual Funds linked to the FGTS (FMP-FGTS).

Without using the FGTS, individuals will be able to buy shares in the company, with a minimum of R$1 thousand and a maximum of R$1 million. Employees and retirees of the state-owned company will be able to buy up to 10% of the total shares offered by the company.

Another item foreseen in the privatization process, this one by decision of Congress, is the contracting of gas-fired thermoelectric plants in regions where there is no supply of natural gas, requiring internalization of gas pipelines. This measure, in the opinion of many experts, should make the tariff for Brazilian consumers more expensive, although the government denies it and talks about reducing costs.