Eletrobras capitalization should improve internal management, assess experts

Confirmation of Eletrobras’ capitalization should have a positive impact on the company’s governance and internal management, according to experts consulted by the CNN Brasil Business .

This Wednesday (18), the Federal Audit Court (TCU) concluded the judgment to continue the process of privatization of Eletrobras. The Court approved the process along the lines proposed by the Union, which will total R$ 67 billion.

In the Eletrobras process, the government will lose its controlling shareholder status with the offering of shares to the market. But it maintains the so-called golden share, or the right to veto measures in discussions that are considered strategic for the country.

Specialists believe that the internal changes should bring benefits to the company, such as cost cutting, the end of political appointments and more impartial decisions on projects.

For the professor at the Institute of Energy and Environment USP (IEA) Virgínia Parente, considering the internal and management aspects of Eletrobras, capitalization can generate a better “pace” for the company.

According to the professor, with the government being the majority shareholder, Eletrobras was often harmed because of the numerous changes in high-ranking positions, such as the directors.

“Many times they were people coming from outside the area and they were internally disruptive. With the private initiative, management will be less political and more impartial, without an agenda, for example”, says Parente.

However, the expert criticized the project as it was approved, with the presence of so-called “tortoises” that can raise energy tariffs for consumers.

The main change with capitalization is that the private sector will hold most of the share capital, consequently controlling the company.

Eletrobras has 105 plants, including 36 hydroelectric plants, including Belo Monte, 10 thermoelectric plants, 2 thermonuclear plants, 20 wind plants and one solar plant. In 2021, the company’s profit totaled R$ 5.7 billion. In addition, it owns 28% of the country’s energy generation and 40% of transmission, the lines that carry energy from one point to another.

For Gustavo Fabricio, a partner at RPS Capital, the privatization of the state-owned company should bring a reduction in costs for the company.

“After capitalization, with more rigid internal changes, the company is fully able to cut costs. Eletrobras will be the largest electric company in Brazil, in this way, it will be able to achieve a significant gain in scale”.

Fabricio cites, as an example, the privatization of BR-Distribuidora, which, according to the expert, two years after the process, “doubled the gain through cutting costs”.

In addition, he also highlights another point. Currently, Eletrobras has a cost of debt above that of private companies, “so, if it takes on a debt, the bank will charge more because it is a state-owned company, since there is a risk there, the government”.

The expert says that this should no longer occur with capitalization, “this cost of debt tends to fall”.

The right to seats on the Eletrobras board will also be another positive change, according to Fabricio. The government will no longer have the right to the majority of seats, the market will be in charge of electing the council.

“Consequently, the market will have a majority and, probably, will elect the president, allowing more rational strategic decisions”, he says.

Although most of the procedures have already been completed, the process that follows is now financial, requiring the presentation of the company to investors, guaranteeing the approval of the CVM and the SEC to, in fact, establish the offer.