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TCU resumes judgment on Eletrobras capitalization this Wednesday (18)

The Federal Court of Auditors (TCU ) will resume this Wednesday (18) the judgment on the second part of the capitalization process of electrobras focused on modeling the procedure.

The resumption takes place after requests from ministers Vital do Rêgo and Jorge Oliveira at the April 20th . At the time, Vital do Rêgo justified the request by claiming that he needed more time to talk to authorities involved in capitalization modeling.

Augusto Nardes, minister of the TCU, said last Friday (13) that he awaits the approval of the process, which will allow the state-owned company to begin the final stage of its privatization process.

“The reasonable thing is to pass the vote. It is clear that we cannot continue with a very heavy state structure like Eletrobras has,” he said.

According to him, “Vital is in its role to improve what is being proposed and check any errors, and it plays an important role”. Nardes assessed, however, that an alternative vote by his colleague should not obtain a majority of votes.

THE federal government also awaits approval of the process with the majority of ministers following the vote of the rapporteur, Aroldo Cedraz, which would allow the company’s share offering to be carried out until July, without inserting the process in the electoral window.

deadlock in the TCU

In the April trial, Aroldo Cedraz voted in favor of the capitalization Eletrobras, in which it accepted most of the proposals from the technical unit and the Public Ministry and suggested specific adjustments to the model proposed by the federal government.

During his vote, the TCU minister listed three points to be worked on the process: the pricing of the power component of the plants granted to Eletrobras, the projection of generation revenues with risk of underestimation of the valuation of Eletrobras and the rules of “poison pill” after the capitalization process.

Before the other ministers could take a stand on the vote, Minister Vital do Rêgo made a request for a review of the process. Initially, the requested analysis period was 60 days, which would make capitalization unfeasible this year. However, after requests from colleagues, the period was reduced to 20 days.

During the TCU session last Wednesday (11), the minister anticipated some elements of his vote and the problems he would have encountered.

The minister claims to have identified a “high accounting of provisions for contingencies” and determined that the technical area of ​​the TCU open an internal investigation to investigate them. Provisions refer to financial liabilities with an uncertain value or payment date.

According to him, the problem would be that, in the 3rd quarter of 2021, Eletrobras increased from R$ 17 billion to R$ 26 billion the value of the so-called individual provisioning to meet judicial decisions contrary to the state, but without a defined date for payment.

The minister understands that, if Eletrobras is capitalized and this amount is reverted in favor of the company, today’s shareholders will have lost these resources with the sale.

The notes were not the first ones made by Vital do Rêgo. When the TCU judged the first part of the capitalization process, referring to the grant amount that Eletrobras will need to pay to operate hydroelectric plants, the minister disagreed with the position of the majority of the court and alleged errors in the government’s calculations.

The value estimated by the government of collection with the capitalization of Eletrobras was R$ 62.4 billion, but the rapporteur of the first phase of the process, Aroldo Cedraz, pointed out errors in the calculation and indicated adjustments in the projections.

At the time, Minister Vital do Rêgo also asked for a review of the process, in December 2021. When it was resumed, in February 2022, he claimed to have another disagreement about Eletrobras’ bonus payment model for the renewal of concession of hydroelectric plants . 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 another R$63 billion.

The minister’s proposal, however, did not receive a majority of votes, with ministers following only the indications of adjustments made by the rapporteur .

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Next steps

According to the text approved by the TCU in February, the Eletrobras sale operation will total R$ 67 billion.

Of this total, R$ 25.3 billion are in grants paid to the National Treasury for the right to use Eletrobras’ hydroelectric plants. Another R$32 billion will go to the Energy Development Account (CDE), with the aim of relieving electricity bills from 2023.

About R$ 9.7 billion will be used to revitalize the watersheds of the São Francisco River, the rivers of Minas Gerais and Goiás, as well as to generate energy in the Amazon and in municipalities in the northern region of the country that are not connected. to the national energy system.

Most of the process has already been completed, with the shareholders of the state-owned company approving on February 22 the start of capitalization.

Shareholders approved the spin-off of the Eletronuclear subsidiaries and the binational hydroelectric plant of Itaipu, the capitalization of the company on stock exchanges, with the dilution of the Union’s participation, and the financial conditions for the privatization to take place.

It was decided that the capitalization of Eletrobras, via the primary public offering of shares and share receipts on the stock exchange, New York (ADRs), allows a dilution of the Union’s voting capital to 45%.

Currently, the government has 51.82% of the ordinary capital and the Economic Bank for Social Development (BNDES) 16.78%, according to the state-owned company’s website.

If in the first offering the objective is not met, a secondary offering of shares will be made. It was also decided to create a special action (golden share) for the Union, with veto power on some issues.

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.

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What will change?

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

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.

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 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.

With information from Reuters and Anna Russi and Caio Junqueira, from CNN

Source: CNN Brasil

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