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Financial News: BRAZIL: Eletrobras Privatization Could Raise US$ 2.43 Bill

BRAZIL: Eletrobras Privatization Could Raise US$ 2.43 Billion For Government

10/22/2017 - 16:48:00 (RTTNews)

(RTTNews) - The privatization of Brazilian state-owned power distributor Eletrobras could increase federal government revenue by R$ 7.7 billion (US$ 2.43 billion) in 2018, said the acting minister of Mines and Energy, Paulo Pedrosa.

He denied that the government wants to transfer the control of Eletrobras to the private sector solely to reduce its primary deficit. The goal, according to Pedrosa, is to make the company more competitive.

"In the case of Eletrobras, the collateral effect would be R$ 7.7 billion in the budget, focusing on improving the environment for the electric sector. We want Eletrobras selling [electricity] at market prices."

Pedrosa said that the current scenario in the energy market is more complicated than before, with technology, management and even climate change impacting on the power generation costs.

"We no longer have the capacity to turn the electricity sector on with BNDES funds," said Pedrosa, mentioning a state-owned development bank. He added that between 2012 and 2015 Eletrobras lost R$ 40 billion in market value due to the policies adopted by the company until then.

The Brazilian government expects to complete the privatization of Eletrobras by the middle of 2018, and the asset sale process will involve all the power plants currently operated by the firm, except for Itaipu and Angra, according to the plans presented so far.

The government wants Eletrobras to bid for new concession contracts for some power plants it already operates. The new contracts would allow the company to set higher prices for electricity in those power plants.

Currently, some of Eletrobras' power plants operate under a particular regulatory framework in which payments amount only to the company's operating and maintenance costs. The price of the energy is lower than market prices under that scheme, but the company is exempt from some regulatory fees.

Eletrobras would have the right to choose whether to keep the plants under the new regime and would pay the government for the rule change. The company, however, would have to raise money for that transaction issuing new stocks. The new shares should cut the government's stake in Eletrobras from 63% to less than 50%.

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