Rapporteur suggests adjustments, but votes in favor of privatization of Eletrobras

The rapporteur of the privatization process at the Federal Court of Auditors, Minister Aroldo Cedraz, made available in the court system, at 12:16 pm this Wednesday, his vote in favor of the privatization of the state-owned company.

The session should be tumultuous, as the minister of the Federal Audit Court Vital do Rego Filho informed on Tuesday, exclusively to the CNN, which would ask for a 60-day view of the process. In practice, this tends to make the sale of the state-owned company this year unfeasible. This morning, ministers advanced an agreement to find a middle ground: neither the 60 that will be requested by Vital, nor the seven days that the government would like.

THE CNN had access to the summary of Cedraz’s vote in favor of privatization. In it, the minister accepts most of the proposals from the technical unit and the Public Ministry and suggests specific adjustments.

There are three main points presented in the vote:

“1) Pricing of the power component of the plants granted to Eletrobras

The matter was the subject of a recommendation in the first stage of the analysis of the process, in the sense of including a clause in the concession contracts providing for the possibility of payment of complementary concession bonuses based on the gains obtained with the future sale of power in the free market.

This recommendation was not met by the Ministry of Mines and Energy, which is why Minister Cedraz is now proposing that the TCU Secretariat present a proposal for an inspection aimed at verifying the impact of the new legal and regulatory provisions on the matter, specifically in relation to the need to undertake the economic-financial balance in the contracts already signed of concessions for the exploration of electric energy.

2) Projection of generation revenues with risk of undervaluation of Eletrobras’ valuation

The modeling developed by BNDES to establish the reference price for the sale of shares in the capitalization process (a value that is confidential) took into account parameters for quantifying the generation revenue considered inadequate by the reporter, taking into account (i) the configuration that the Brazilian electricity sector will assume in the scenario of expansion of the free contracting environment (ACL) and (ii) the international examples that can serve as a comparison. As a result, the Minister is proposing that BNDES, as the agent responsible for modeling the capitalization process, be determined to use more adequate parameters for estimating these revenues, an essential input for establishing fair value for offering Eletrobras shares to the market. .

3) “Poison Pill” rules after the capitalization process

According to the model proposed by the BNDES, the transformation of Eletrobras into a corporation would have, as one of the control instruments, the establishment of a “poison pill” clause, according to which a shareholder that exceeds certain limits of shareholding participation would be penalized with the obligation to carry out a public offering to acquire the shares of the other shareholders for an amount up to three times higher than the highest historical price of the shares in the market. Although such a clause is relevant to avoid a hostile takeover of Eletrobras by a private investor (as in the attempt made by Twitter last week), such a mechanism would imply the imposition of a disproportionate burden on the public power in the event of a possible strategic need of resumption of control by the State, a possibility that is guaranteed by the constitutional text.

Thus, in order to preserve the prerogative of the Federal Government to, at any time, reverse the process of privatization of Eletrobras, upon payment of fair values ​​- but not exorbitant – to the other shareholders, the Minister is proposing the revision of the “poison pill” suggested by BNDES.”