In Brazil, the privatization of Eletrobras adopted by the Parliament

In Brazil, the privatization of Eletrobras adopted by the Parliament
In Brazil, the privatization of Eletrobras adopted by the Parliament

The Brazilian Chamber of Deputies adopted Monday, June 21 a plan to privatize Eletrobras, Latin America’s largest electricity company, an important part of President Jair Bolsonaro’s state disengagement program. The deputies, meeting in extraordinary session, adopted the text by a large majority, 258 votes for and 136 against. It had already been approved Thursday by the Senate.

The privatization of Eletrobras must be done through the issuance of new shares in order to reduce the State’s participation in the capital of the company from 51.8% to 45%. Even if the state will lose control of the group created in 1962, one of the four largest state-owned companies in Brazil, it will retain a « golden share » for strategic questions.

Article reserved for our subscribers Read also Privatization in Brazil, despite the pandemic

MPs had already approved the project last month, but were due to vote again after the Senate made changes to it, such as an increase in the share of energy production to come from thermal power plants. They still have to vote on a number of amendments before sending the text to the Head of State for promulgation.

Opposition worries about price hikes

The government hopes to carry out this privatization in early 2022 and earn 60 billion reais (9.98 billion euros). But before that, the Itaipu dam and the Eletronuclear nuclear power plants, which must be managed by the state according to the Constitution, will have been detached from the Eletrobras group. The privatization process was triggered by an ordinance of 23 February which was valid for only four months.

Before the vote, Jair Bolsonaro warned: “Without [cette] privatization, the energy system in Brazil will find itself in chaos ”.

Investors expected to see the approval of the privatization of the group, which supplies almost a third of the electricity of the largest economic power in Latin America. Eletrobras shares rose 10% during the session on Friday after Senate approval, and more than 35% since the start of the year with a view to privatization.

The opposition is concerned, however, that the loss of state control will result in higher electricity prices and represent “A threat to national sovereignty”. But the ultraliberal Minister of the Economy, Paulo Guedes, assured that the operation would reduce the electricity bill of homes and businesses by up to 7.4%.

Electricity shortages

These debates come at a time when Brazil is grappling with a severe drought and power shortages.

85% of electrical energy is produced in the country by hydroelectric power stations. Eletrobras has about fifty of them. The group produced some 185 million MWh in 2019. Even though the company has been profitable in recent years, it lacks financial reserves to remain competitive.

“Capitalization is fundamental for the company to recover the capacity to invest”, its president, Rodrigo Limp, said last week.

For Adriano Pires, director of the Brazilian Center for Infrastructure (CBIE), the privatization will allow Eletrobras to obtain resources for “Revitalize watersheds” and deal with climate change. “It is becoming increasingly clear that water is going to become one of the most expensive resources on planet Earth”, he told Agence France-Presse.

Despite the delay due to the coronavirus crisis, the government of Jair Bolsonaro hopes to carry out a hundred privatizations, for an amount of 445.6 billion reais (around 74 billion euros) which will bail out coffers well empty. Brasilia recently carried out successful auctions of concessions for some 20 airports, port terminals and the Rio de Janeiro water company.

The World with AFP

 
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