The Brazilian Senate approved the privatization of Eletrobras: euphoria on the stock market

To an extent that impacted the markets this Friday with hiking record, the Senate of Brazil approved the plan to privatize Eletrobras, the largest electricity company in Brazil and Latin America.

It will be through a capitalization process that can cede to the state 12,000 million dollars. The rule must now be voted on by the deputies.

The news immediately triggered the company’s shares on the São Paulo Stock Exchange.

The project was approved by 42 votes in favor and 37 against. The last procedure in deputies is due to end next week, since the initiative is valid for three months, which in this case will be executed next Wednesday.

The plan

Thanks to this project, the state’s stake in the company will be reduced from 60% currently to 45%, all through a public offering of shares on the São Paulo Stock Exchange.

This majority part would remain in private hands. The project requires that each private shareholder cannot hold more than 10% of the total capital and reserves for the State a “gold share” which would give it a right of veto over certain decisions of the company.

The Speaker of the Chamber of Deputies, Arthur Lira, has announced that the Senate bill will be dealt with in a sitting convened for next Monday, a day when there is usually no plenary debate.

According to government calculations, revenues of $ 12 billion would occur this year or in the first quarter of 2022.

The operation puts the government of Jair Bolsonaro and his finance minister Paulo Guedes back on the path it had initially promised to reduce the state’s participation in certain mega-service companies through privatization.

The measure also comes a few months before next year’s presidential election for which, according to polls, Bolsonaro is tied with former Social Democratic leader Luiz Inacio Lula da Silva, a critic of the measure.

Electricity giant

The size of Eletrobras is really important. The company owns 43% of the country’s transmission lines, with a combined extension of 76,230 km, and has an installed generation capacity of 50,676 megawatts, equivalent to 29% of all Brazilian production.

Last year, the state-owned company made a net profit of R $ 6,387 million (approximately $ 1,205 million), a value 43% lower than in 2019, due, among other things, to the worse performance in the production segment.

The far-right Bolsonaro government had spurred this operation by warning that the country is on the verge of a serious water crisis and that the electricity sector “will suffer the consequences”.

Union resistance

The measure is opposed by the unions and some political parties in addition to the PT, such as the PSOL, which defines itself as the left. Its lawmakers have said the operation will affect the country and the people.

But the government estimates that the privatization of Latin America’s largest electricity company can reduce the electricity bill by up to 7.36%, unlike some entities in the electricity sector, which denounce that the result may be l ‘reverse.

The approval of privatization in the Senate represents a political victory for Bolsonaro, who this week redoubled its support for the project by saying that state-owned enterprises are prone to corruption.

The president, however, avoided responding when asked if a supporter asked if the sale would lead to a price hike.

The bill won the support of the Senate when Brazil faces one of the worst droughts in its history, which has affected the reserves of its main hydropower plants, which could lead to energy rationing.

The government has already established a pricing system that increases the value of electricity for home consumers.

In the financial market, the news was greeted with joy. In Friday’s session, the company’s shares on the São Paulo Stock Exchange jumped 7.51% around the afternoon, reaching 46.53 Brazilian reais, after hitting a record 47.69 reais. during the day. .

On Thursday, the company’s shares were trading at 43.28 reais at the close of trading. The values ​​of the electricity company are the ones that gained the most momentum on the closing day of the week in the Brazilian Bovespa.

Source: EFE, AFP and AP