Brazil : coming soon privatized, the electrician Eletrobras flies in Stock

The brazilian government plans to privatize the energy company Eletrobras, reducing its stake in the capital, announced the department of Energy, as the country attempts to reduce a public deficit astronomical. In addition to this operation, the company could experience an increase of capital.

“It is a fundamental operation for the development of the brazilian electric sector,” said Tuesday the minister of Energy, Fernando Coelho, during a press conference in Brasilia.

The State has now the 40,98% of the share capital of Eletrobras and the majority of the voting rights, the public development bank BNDES 18,72% of the shares of common stock and 14% preferred stock. A source from the ministry of Energy has explained to the AFP that it was the government’s intention to retain his right of veto through preferred share (“golden share”).

This decision has been welcomed so euphoric by the markets, ordinary securities of the group ended on a dramatic rise in the Sao Paulo stock exchange: 48,87% of the common shares and 32,59% for the preferred shares. What boost to the index Ibovespa, passed over the bar of the 70,000 points for the first time since January 2011. The ADR Eletrobras listed in New York has also jumped by more than 34% to 5.96 dollars Tuesday on Wall Street.

An operation to be over 5 billion euros

The government hopes to obtain $ 20 billion réais (about 5,35 billion euros), said the brazilian minister of Mines and Energy at Reuters. According to the calculations of the economic newspaper Valor, the increase of the shares has grown from $ 9 billion to réais (about 3.3 billion euro), the market capitalization of the public company.

For the ministry, the”ineffectiveness” and the debts accumulated by the company have a cost too high, “using public funds that could be used in security, education or health”.

The government of conservative president Michel Temer wants to build on the experiences of the aircraft manufacturer Embraer and the mining giant Vale, privatized, respectively, in 1994 and 1997. The privatization would not include, however, not in a first time the hydroelectric plant of Itaipu, Paraguay is co-owner, or nuclear power plants.

Empty crates

Last week, the government has substantially revised upwards its estimates of the budget deficit, bringing it to 159 billion réais (42.7 billion euros) for this year and next, due to tax revenues less than expected. Initially, the aim was to maintain the deficit below the 139 billion réais (to 37.3 billion euros) for this year and 129 billion in 2018.

To replenish the coffers of the State, the government last year announced a wide ranging privatization programme, which includes concessions for the management of many airports in the country.

A policy strongly criticised by the ex-president left Dilma Rousseff (2011-2016), destitute in the last year to make up public finances.

“They want to sell off our hydro plants, ( … ). Result: the consumer will pay an electricity bill in the stratosphere without any guarantee of supply,” she lamented Tuesday on Twitter.

(with AFP and Reuters)

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