Arquivos watchdog - Murray Advogados

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

https://valorinternational.globo.com

Aroldo Cedraz — Foto: Jorge William/Agência O Globo

The Federal Court of Accounts (TCU) confirmed Tuesday the May 18 date for the resumption of the Eletrobras privatization trial. Contaminated by political polarization, the operation gained a curious chapter last week, when TCU member Aroldo Cedraz surprised his colleagues by suggesting that an eventual attempt to retake control of the company by the government would be eased.

Rapporteur of the matter in the public spending watchdog, Mr. Cedraz delivered his opinion to his colleagues less than two hours before the beginning of the session. Among the proposals was a change in the mechanism that aims to protect minority shareholders against the takeover by means of a hostile bid, known as the “poison pill.”

A week earlier, Twitter’s board had triggered the poison pill against the onslaught of businessman Elon Musk. Not even this strategy, however, was enough to stop the billionaire, who now owns the social media.

In Brazil, the tool has also been dubbed the “anti-Lula clause.” Leader in the polls for this year’s election, the former president has already spoken out against the privatization of Eletrobras, and his allies said he would reverse the operation if elected.

To make such a maneuver more difficult, the Brazilian Development Bank (BNDES) has included a poison bill in the privatization model. Anyone interested in taking control of Eletrobras — whether the federal government or a private-sector organization — would have to pay a high amount to the other shareholders and then convince them to change the company’s bylaws.

Under the rules in force in the model delivered to the TCU, the person interested in taking control must make a public offer to buy the stakes of the other shareholders at a price three times the highest stock price recorded for the asset. Even so, even with a share of more than 50% of the voting capital, the voting power would be restricted to 10%.

To break this second barrier, a shareholders’ meeting would have to be called to approve the change in the bylaws. Mr. Cedraz considered those conditions “unfair” for an eventual strategic need for the retaking of the company by the federal government. He then proposed a kind of antidote to the poison.

“In order to protect the prerogative of the federal government to, at any time, reverse the privatization process of Eletrobras, by paying fair — but not exorbitant — amounts to the other shareholders, this TCU member proposes the revision of the poison pill clause suggested by BNDES,” he said.

His central argument is based on the strategic importance of freshwater reservoirs, which has led some governments to meddle to prevent market abuses by private-sector hydroelectric generation companies.

“This kind of intervention has proven necessary, mainly because of the ongoing global power crisis and transition. While France resumes studies to nationalize a large company in the electricity sector, Spain and Portugal present to the European Union a plan for state intervention in the sector through measures aimed at lowering power prices in the Iberian Peninsula,” the rapporteur argued.

The proposal surprised the market, and even more the other TCU members. President Jair Bolsonaro’s main ally in the court, Jorge Oliveira, was warned by technicians in his office about the antidote and called member Benjamin Zymler, considered a technical reference in the electricity sector.

The two acted quickly and, a few minutes before the beginning of the trial, convinced Mr. Cedraz to back off. The rapporteur announced the withdrawal of the idea in the middle of the reading of his vote, which caused another surprise in the room, the second in a few hours. “Shame on you,” said one member during the session.

With Mr. Cedraz’s change, the “anti-Lula clause” was preserved. According to Valor, the rapporteur was convinced that it would not be necessary to privatize in order to avoid abuses by a private partner. In such a situation, the federal government could simply cancel the Eletrobras concessions and take over the contracts through a new state-owned company.

Source: Valor International

https://valorinternational.globo.com

Posts

Public spending watchdog member sees flaws in Eletrobras’s results

Public spending watchdog hampers maneuver on Eletrobras