The Court of Auditors of the Union (TCU), Brazil's public spending oversight body, approved on the eve (Wednesday) the proposal for the privatization of Eletrobras, Latin America's largest electricity company, thus giving its approval for the government to conclude the process before the October elections.
The proposal by which the State will get out of control of the electric giant and its privatization model were approved by the court, a body linked to Congress, by seven votes in favor and only one against by the magistrates, after a process that had been postponed several times and that even put in doubt the sale of the company, which now overcame what was its last hurdle.
In the event that the government manages to conclude before the elections some bureaucratic procedures still necessary for the sale process, since it still depends on adjustments with the stock exchange regulatory bodies both in Brazil and in the United States, the privatization of Eletrobras will be the first of a major state-owned company in the administration of President Jair Bolsonaro.
The government's initial proposal was to put the company's shares up for sale on May 13, but the delay of the process in court forced it to postpone the offer to a date yet to be defined, although the market expectation is that the operation will be carried out in August.
The process is a priority of the government of the ultra-right leader, who since taking office, in January 2019, launched an economic policy of marked liberal tinge, with emphasis on privatizations and concessions, aimed at reducing the size of the State.
According to the sale model approved by Congress in June last year, the government will privatize Eletrobras by issuing new shares of the state-owned company that will be sold on the stock exchange in an auction in which the State will not participate.
According to provisional estimates, the privatization of Eletrobras, through this capitalization process, could yield the Brazilian State some US$ 21.3 billion and reduce its stake in the company from the current 60% to 45%.
The approved model will leave the company without a defined controller and will pulverize the company's capital, which will be managed by an independent board and presidency, whose members will be elected by a majority of the shareholders.
Despite the sale of control, the process guarantees the State a "golden share", which would give it veto power in strategic decisions of the company.
The model also excludes from the sale both Eletronuclear, a subsidiary of Eletrobras that operates Brazil's three nuclear plants, and the giant Itaipu hydroelectric plant, which the Brazilian state shares with the Paraguayan state and which is managed by the state-owned company.
Eletrobras, responsible for a third of Brazil's generation, owns about half of the country's transmission lines, with a combined extension of more than 70,000 kilometers of power lines, and an installed generation capacity of about 50,000 megawatts (MW).
The only vote in the TCU against the privatization was that of Justice Vital do Rego, who in April had already asked for a postponement of the process to hear some specialists, considering that the company will be offered for a much lower value than it has.
Do Rego requested again this Wednesday that the process be suspended until the court's technicians conclude a study on the true value of the company's judicial debts, which are blamed for the undervaluation of Eletrobras, but his request was rejected by seven votes to one.
Despite the approval, the court members made it clear that both the Ministry of Mines and Energy and the state-owned National Bank for Economic and Social Development (BNDES), which is assisting in the operation, must comply with some of the body's recommendations before proceeding with the sale.