Programa de Parcerias de InvestimentosPPI

The privatization process of Centrais Elétricas Brasileiras S/A - Eletrobras was qualified in the Investment Partnerships Program (PPI) at the 3rd Meeting of the PPI Council, on August 23rd, 2017, through Resolution 13. It is the proposal of the Ministry of Mines and Energy (MME) to the PPI Council, with the objective of reducing the Union’s participation in the capital of Eletrobras, with its consequent democratization in the Stock Exchange.

Eletrobras is the largest electricity company in Latin America (and the 16th largest company in the world), responsible for approximately 31% of generating capacity, 47% of transmission and 7% of electricity distribution in Brazil. Of course, it is an interesting project for investors. Similar cases of privatization, such as Embraer, Companhia Vale do Rio Doce and Telefonia, denote the opportunity to the investor for this venture.

Project additional data:

Energy generation capacity: 49,801 MW

Generating centrals (total): 227 units

Hydroeletric centrals: 48 units

Thermoeletric centrals: 106 units

Aeolic centrals: 70 units 

Solar central: 1 unit

Transmission lines: 71,068 Km

Federal Government participation in ordinary shares (vote right): 51%

Federal Governament total participation: 40.98% 

Source: SPPI based on data of Eletrobras Annual Report – 2018

 

The proposal of privatization aims to give the company greater competitiveness and agility to manage its operations, without the ties imposed on the state. This move will allow Eletrobrás to implement the corporate governance requirements demanded by the “new market”, equating all shareholders - public and private - with total transparency in its management. Therewith, there will be new opportunities for the expansion of the quality of public infrastructure and the guarantee of the supply of electric energy in an efficient way and at the lowest price for the Brazilian society, making the flow of investments in the electric sector possible.

In this context, it is clear that the project has high priority in the governmental agenda. And, among the concrete challenges that justify the partnership between the public and private sectors for their realization, the following stands out: the need to stimulate technological development; to improve the governance of Eletrobras; of valuing and developing the capital market - a strategic element for the Brazilian economy.

The effectiveness of the privatization depends on governmental authorizations, evaluation of the necessary legal and regulatory authorizations, evaluation of the model to be adopted and compliance with the specific procedures - being a publicly-held mixed-capital corporation with shares listed on the São Paulo Stock Exchange (B3 - Brazil, Stock Exchange, Counter), New York (NYSE) and Madrid (Latibex).
 

Background - Centrais Elétricas Brasileiras SA (Eletrobras) is a mixed-capital company controlled by the Brazilian government, constituted by Law no. 3.890-A, dated April 25th, 1961. At that time, Eletrobras was granted the attribution of promoting studies, projects of construction and operation of generating plants, transmission lines and substations destined to the country’s electricity supply. The new company started to contribute decisively to the expansion of the electric energy supply and to the country’s development.

In the 1990s, Eletrobras lost some of its state functions and underwent changes in its profile. After this period, the company also began to act, by legal and transitional determination, in the distribution of electricity, through companies in the states of Alagoas, Piauí, Rondônia, Acre, Roraima and Amazonas.

Currently, the company controls:

a) 13 subsidiaries of generation, transmission and distribution of energy;
b) a research center (Eletrobras CEPEL);
c) a holding company (Eletrobras Eletropar);
d) half of the capital of Itaipu Binacional;
e) indirect shareholding in more than 170 Special Purpose Companies (SPE);
f) minority interests in 26 companies.