Eletrobras: Expanding power was an option to renationalize, says MME – 05/15/2023 – Market

The Minister of Mines and Energy, Alexandre Silveira, said that the federal government even made a request to study the renationalization of Eletrobras, but ended up opting for the strategy of increasing its shareholding in the company.

At an event by the Esfera Brasil group, the head of the MME said that the request came from President Luiz Inácio Lula da Silva (PT), but the proposal did not go ahead.

“After much discussion and much debate, I actively participated in this, it was reached the conclusion that, in a first moment, the most adequate thing was to reestablish the proportional political rights of the Union”, he affirmed during a panel on infrastructure and energy.

Silveira, however, repeated that renationalization is no longer on the government’s agenda. “It was really the government’s first internal debate. I understand, until then, that this debate was won when the government decided on the second path, which was to have an effective participation”, he stated.

Lula is trying to overturn the section of the law that prohibits a shareholder or group of shareholders from casting votes for more than 10% of the number of shares into which the company’s voting capital is divided —an understanding that would apply only to shareholders with that position before privatization.

In a request through the AGU (Advocacia-Geral da União), Lula says that the Union kept 43% of the company’s common shares, considering direct control and other forms of participation, but had its voting power reduced to less than 10 % of voting capital after the law.

According to Silveira, it is known that Eletrobras is a “corporation”, which was created to have dispersed capital and that investors bought the shares believing in this model. However, he considered that it is necessary to reflect that the government has 43% of the shares without having a proportional participation in the council.

“The government already has the regulatory power, but there is an understanding that there is a distortion in a very sensitive area for the nation,” he said.

The minister said he saw no contradiction between filing the lawsuit and the government’s commitment to respect for contracts, regulatory strengthening and legal certainty.

“It is public that the elected President of the Republic, during the campaign and throughout his trajectory, is critical of the privatization process of national strategic companies, which is the case of Eletrobras and Petrobras. This he never hid from anyone and he won the elections with this speech. So there is coherence in this posture”, he said.

In the view of the head of the MME, in the same way that the private sector seeks Justice to defend its interests, it is legitimate for the government to seek the Judiciary to resolve the doubt whether or not it can have this right proportional to votes.

“The judicialization of a process where the government seeks to re-establish its political rights in proportion to the shares it has in a private company does not break the legal rule. Quite the contrary, not least because the government is using the means provided to it by the Democratic State of law”, he highlighted.

Silveira reinforced that the government has no intention of becoming controller of Eletrobras again. According to him, the privatization law itself has instruments that prevent this, such as the golden share —a kind of special action— and the poison pill, which makes it difficult to recover the majority position.

Market sees ‘very bad situation’ at Eletrobras, says expert

Adriano Pires, director of the CBIE (Brazilian Infrastructure Center), who also participated in the panel, said he understood the minister’s considerations, but said that investors see the situation differently.

“The market sees that there is a very bad situation, because it ends up scaring the investor right at the beginning of a government contesting the capitalization process of Eletrobras.”

Pires stated that President Lula has every right to put his ideas and campaign promises into practice, but that the problem would be “looking back”, contesting what has already been approved by the National Congress.

“I think the government wasn’t happy with putting the issue the way it did, it could be otherwise, it’s bothering you, yes.”

The panel also had the participation of Bruno Dantas, minister and president of the TCU (Union Court of Auditors), who recalled that the privatization process was examined “with a magnifying glass” by the body.

He pointed out, however, that the TCU evaluates the legality of the procedures and that the matter is now being discussed at a higher level, at the level of constitutionality.

In his speech, Dantas hinted that there is no constitutional problem in the case, given that the STF (Federal Supreme Court) followed the case at the time and did not suspend the process.

“The feeling I have is that when such flagrant illegality is identified, the Supreme Court manifests itself quickly,” he said. “If a flat unconstitutionality, as we call it in the Law, were detected, certainly the Supreme Court would already have suspended this law”, he pondered.

Silveira said he understands that there is room for dialogue and for building a solution, noting that this is not a discussion that tries to hide or find another way to renationalize the company.

“Actually, the minority representatives, and very minorities, are the ones who have control on the board, because it is the corporation’s model and we do not fail to recognize that. But the more substantial participation of the Union in Eletrobras, I think it will not change its legal nature,” he said.

Minister does not rule out intervention in Light

In an interview with journalists after the panel, Silveira spoke about Light, which had its request for judicial recovery accepted this Monday.

The minister said that it is natural to question whether or not the company could apply. Not just from a legal point of view, but from the granting authority’s point of view as well.

Questioned whether the government is considering intervening in Light, he did not rule it out. “All possibilities have to be studied, all of them. The only possibility we have to rule out is the compromise of supply services to the people of Rio de Janeiro,” he said.