Brazil to privatise state-owned power company Eletrobras

Stock price soars as government announces plans to offload controlling stake.

The stock price for Brazil’s national power company, Centrais Eletricas Brasileiras, or Eletrobras as it is known, jumped by 49 percent on Tuesday after the government announced plans for privatisation.

Fernando Coelho Filho, Brazil’s minister for mines and energy, said in a letter to Eletrobras’ board of directors that privatisation would expand investment opportunities and improve the company’s governance. For years, Brazil’s state-owned corporations have been at the center of corruption accusations.

“This measure will bring greater competitiveness and agility to the company in the management of its operations, without the bonds imposed by being a state-controlled enterprise,” the ministry said in a statement.

The government, which holds 51 percent of voting shares and 41 percent of total shares, did not provide details for when or how the privatisation would proceed. It did say it plans to retain a minority interest to maintain veto power.

BNDES, the Brazilian development bank, holds close to 20 percent of voting shares and JPMorgan owns 2.56 percent.
Selling its controlling stake in Eletrobras could raise up to 20 billion reals ($6.3 billion; €5.4 billion), Filho told Reuters in an interview.

A quick move to privatisation seems unlikely. Any sale process must be approved by Brazil’s president, Michel Temer, and must pass regulatory review. Eletrobras also must shed its nuclear assets, which are not allowed to be privately owned under Brazil’s constitution.