TCU minister defends correction of Eletrobras grant by R$ 63 billion

After asking for a view in December 2021, the minister of the Federal Audit Court (TCU), Vital do Rêgo, pointed out three flaws in the modeling and pricing of Eletrobras’ privatization.

According to him, mistakes in the long-term energy price estimates, in the hydrological risk and in the cash flow discount rate result in an undervaluation of R$ 63 billion from the sale of the state-owned company.

“Failures in the modeling and pricing parameters used result in the undoing of the Union’s assets for a lower value than it actually represents, with deleterious consequences for the electricity sector”, he said during his vote in an extraordinary session this Tuesday (15) .

Vital do Rêgo defended that the total power of the hydroelectric plants be considered in the calculations. In addition, the minister contested the rules for transferring hydrological risk.

“The value of the VAC (Value Added to Contracts) amounts to R$ 130.4 billion. This would imply in R$ 63.7 billion destined to the CDE and R$ 57.2 billion to the National Treasury. Ministers, I ask if we are going to allow the process to be sequenced with a grant amount of BRL 23 billion destined for the Treasury and BRL 32 billion for reasonable tariffs”, he asked, citing simulations by SeinfraElétrica requested by himself.

The minister also made notes on the tariff impact of privatization. According to SeinfraElétrica’s calculations presented by him, the consumer will be burdened in about R$5.2 billion and R$10.3 billion per year, totaling an amount of R$52.4 billion to R$104.2 billion in 30 years. This equates to a tariff increase of 4.3% to 6.5% per year.

“The data contained in the authors do not allow the assessment of the real sectorial impact (tariff) on consumers resulting from privatization. […] They say that we need to privatize to increase investments and have tariff neutrality, but no investment is planned and the tariff neutrality claimed by the ministry, the regulatory agency says no,” he said.

Thus, the vote of Minister Vital do Rêgo, conditioning the privatization to the fulfillment of the determinations for the correction of flaws in the modeling and in the pricing of the privatization, makes the privatization of the state-owned company unfeasible at the moment. Next, Minister Benjamin Zymler voted for the approval of privatization along the lines of the government and defended that the determinations in the vote of Minister Vital do Rêgo are recommendations.