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The Federal Court of Accounts (TCU), a public spending watchdog, approved Tuesday the first phase of the technical studies for the privatization of Eletrobras. The trial ended with six votes in favor of approval and only one against. The approved values will now be used to help define the share price that will be considered for the company’s capitalization, a phase that will still go through the TCU’s scrutiny.
TCU member Vital do Rêgo revealed on Tuesday an underestimation of R$34 billion in the value of the concession payment that should be paid to the National Treasury in Eletrobras’ privatization. Valor had already reported that there was a methodological error in the calculation of the value added to the state-owned company’s contracts.
With the adjustments requested by Mr. do Rêgo, the amount would rise to R$57.2 billion from the current R$23.2 billion. On the other hand, transfers to the Energy Development Account, which will be used to cushion the impact on electricity bills, would increase to R$63.7 billion from R$29.8 billion.
The bulk of the difference is due to the fact that the government did not consider in the model presented the pricing of the power of the 22 hydroelectric plants of Eletrobras. Another smaller adjustment was motivated by flaws in the definition of the hydrological risk criteria for the coming years.
“In an inexplicable and illegal way, the pricing of power was not presented. An absurd, huge mistake,” the TCU member said. “I understand that this is a non-negotiable situation.”
Despite Mr. do Rêgo arguments, the other TCU members chose to approve the model and proceed with the process. “I think we still don’t have the level of development enough for the proper appropriation of the power market,” said Benjamin Zymler, who is seen as an expert in the field.
His assessment is the same as that of the government, which justified the absence of values referring to power by the lack of a market for this asset. In this sense, claims the Ministry of Mines and Energy, it would be impossible to price the power.
Still, Mr. Zymler said he shared Mr. do Rêgo’s perception and did not see the company’s privatization ripe for development. “It is not yet at an adequate level of maturity. If Eletrobras were mine, I would not privatize it with these accounts,” he said.
Mr. Zymler also considered the possibility of determining the government to commit to include a clause in the contract providing for possible compensation if a power market becomes viable in the future.
The proposal, however, ended up reversed in recommendation, under protests from Mr. do Rêgo. “We are selling Eletrobras for half the price and the private sector is celebrating,” he said.
The other TCU members considered that the conclusion of the privatization would be more beneficial than postponing the process or keeping Eletrobras under state control.
“Any perception by the market of an overestimation of the value added to contracts would scare investors away, reduce share prices and make fewer resources available for investment. What people ask for and desire is investment for the sector,” TCU member Walton Alencar said.
The uncertainties surrounding the trial led the first level of the government to reach TCU ministers individually to avoid a setback.
Ministers Paulo Guedes (Economy), Ciro Nogueira (Chief of Staff Office) and Bento Albuquerque (MME) asked TCU members not to determine any change in the economic and financial model, sources say.
The government sought the members of the public spending regulator with the aim of letting them know how important the process is. If it moves forward, this would be the first privatization during the Bolsonaro administration.
Yet, if the sale takes a long way in the TCU, which can still happen, it will hardly end this year, which will be virtually all taken by the elections.
Source: Valor International