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Vital do Rêgo, a member of the Federal Court of Accounts (TCU) that requested more time to study the Eletrobras privatization trial, will tell the court this Wednesday to halt the analysis of the case until alleged irregularities in the company’s financial statements are corrected.
One issue is related to a R$2.7 billion debt that Eletronuclear has with Eletrobras. The liability, created by the withholding of dividends, is allegedly not recorded in Eletrobras’s results. The company replied that it will not comment on the case.
Another issue identified by the TCU member is in contingencies reported by Eletrobras for possible unfavorable decisions in courts. According to Mr. Rêgo, who requested an audit of the contingencies, the way the operation was designed could represent losses to the country.
Only in the third quarter of last year, the company increased by R$9 billion the amount of the provisions, which reached R$26 billion. If Eletrobras wins the lawsuits in court, the funds will return to the balance sheet as profit and then be partially distributed as dividends.
In this case, Mr. Rêgo said, the government could lose, since its stake in Eletrobras – and, consequently, in dividends – will be smaller after privatization. The government expects its slice to fall to 45% from 72%.
If Eletrobras is defeated in the courts, the state could also lose. This is because the company went to court to ask that the state be considered “jointly” liable. The liability arose from compulsory loans made over the years through electricity bills.
If the Superior Court of Justice (STJ) rules that the state is jointly liable, half of the R$26 billion in provisions would be transferred as a liability to the Treasury.
Despite Mr. Rêgo’s points, the plenary is expected to approve the opinion of rapporteur Aroldo Cedraz and release the privatization. In this case, the government expects to move forward with a capital increase in July that will transfer the control of the state-owned company to the private sector.
On Tuesday, unions representing Eletrobras servers filed a complaint against the company with the U.S. Securities and Exchange Commission (SEC). They say that the company is allegedly hiding from the shareholders the dimension of the financial risks of the hydroelectric plant of Santo Antonio, in Rondônia.
The unions argue that Eletrobras has been delaying the disclosure of sensitive financial details about the plant in an attempt to speed up privatization – even as this imposes losses for the company and its shareholders in the future.
Analyzed in two stages, the privatization case was passed in both cases by TCU’s technical team and has the support of most of the court’s members. This week, the new minister of Mines and Energy, Adolfo Sachsida, met with several TCU members to ensure support for the project.
If privatization is approved, a general meeting of the company’s shareholders is still planned, followed by the publication of the 20-F form, which contains information about the operation for SEC and foreign investors.
The timetable also foresees the publication of the prospectus of the stock offering, the book building and, finally, the liquidation of the operation.
Despite the warnings made by Mr. Rêgo, however, government sources heard by Valor believe that the privatization will pass this Wednesday in TCU. The subject was discussed Tuesday at a meeting held at the Ministry of Economy, attended by the minister himself, Paulo Guedes, Mr. Sachsida, the Federal Attorney General Bruno Bianco, Eletrobras CEO Rodrigo Limp and specialists from the ministries and the company. “We believe that it will be approved by the TCU, with Vital voting against it,” a government source said.
Another source from the Economy explains that “the doubts that the TCU specialists had have all been answered,” but acknowledged that the trial is also “political.”
(Lu Aiko Otta and Estevão Taiar contributed to this story.)
Source: Valor International