Petrobras: Lula wants explanation from Prates about dividends – 03/10/2024 – Panel SA

President Lula awaits the president of Petrobras, Jean Paul Prates, for a conversation that promises to be tense this Monday (11) at Palácio do Planalto. Prates will have to explain why investors were counting on the payment of extraordinary dividends, although this had been rejected by government members on the Petrobras board.

The breach of this expectation, combined with criticism about an official intervention in the company’s management, led to a drop of R$30 billion in the value of the company’s shares last week.

Prates’ conversation with Lula will not be peaceful. The president’s advisors claim that, at the end of January, the head of the oil company and financial director Sergio Caetano promised, in private meetings with investors in New York (USA), an extraordinary distribution of dividends – which generated expectations in the market.

People who participated in the conversations in New York consider, on condition of anonymity, that there were no promises. They stated that the Petrobras command only defended, in the USA, the full payment of extraordinary dividends since, according to market rules, this money cannot be used either to cover expenses or to make investments.

Planalto’s advisors claim that President Lula had information that, if the extraordinary dividends were paid in full – as proposed by the executive board –, the company’s debt to finance its investment plan would exceed the defined ceiling of US$65 billion.

Last year, the investment plan targeted US$109 billion and was cut by US$7 billion so that the US$65 billion debt level would not be reached.

Around eight meetings were held with the board of directors around the 2023-2027 investment plan. The concern at that time, according to Planalto’s advisors, was that the level of confidence in the plan would drop too much due to Petrobras’ financing capacity for its execution.

The version that reached Lula is that, this year, even in this scenario, representatives of the executive board would have ignored the assessment of Petrobras’ risk area and proposed to the board that it approve the distribution of extraordinary dividends.

For the executive board, this wouldn’t make the slightest difference. In the discussions, Prates and Caetano said that, according to the law of Corporations, even if this money was not distributed, it could not be used for current expenses, nor for investments.

From 2021 to 2023, Petrobras distributed R$365.5 billion to shareholders. In 2023, Petrobras disbursed more than R$98 billion in dividends, an amount already well below that seen in 2022, which surpassed the historic mark of R$194 billion given record profits and the Jair Bolsonaro government’s expectation of privatizing the company. This year, with the board’s decision, total dividends will reach around R$72.4 billion this year.

Petrobras sources inform that the proposal worked on for months by technical and financial management, and presented by the executive board to the board, was to create an “account” filled with part of the extraordinary dividends – something that would be done for the first time.

It would be a way to get shareholders used to postponing the payment of these dividends later. The other half would be distributed, including to the government itself, which has a 37% stake.

By this logic, dividends would be distributed, on average, similar to those of other foreign oil companies. Thus, Petrobras would no longer be among the largest dividend payers, but it would be possible to meet market expectations and the government’s plan.

With Diego Felix

LINK PRESENT: Did you like this text? Subscribers can access five free accesses from any link per day. Just click the blue F below.