Brazil: Eletrobras goes against governance and increases power at Eletronuclear

By Lais Carregosa

Eletrobras has bypassed the governance understanding of Eletronuclear and expanded its power in the Board of Directors of the state-owned company.

On April 27, the privatized company succeeded in appointing two of its vice presidents as independent directors at Eletronuclear, despite a recommendation to the contrary from the governance of the state-owned company.

When it was privatized, Eletrobras signed a shareholder agreement with ENBPar (Empresa Brasileira de Participações em Energia Nuclear e Binacional), which allowed the company to appoint Eletronuclear’s chief financial officer and two independent directors.

On March 20, the company appointed Camila Gualda Sampaio Araújo and Élio Gil Meirelles Wolff to the independent positions.

Camila is vice president of Governance, Risk, and Compliance, while Élio is vice president of Strategy and Business Development at Eletrobras.

An opinion published on April 25 by Novotny Advogados said that the two could not be considered independent since they are employees of Eletrobras.

The appointment would go against what is stipulated in the State Law and the decree that regulates it.

“The nomination to the Board of Directors of ETN [Eletronuclear] of people who have been, or still are, employees or directors of Eletrobrás in the last three years does not seem to meet the requirements of independence of directors,” states the opinion to which Power360 had access.

Poder360 found out that the Eletronuclear Eligibility Committee and the Eletronuclear Board of Directors followed this understanding and recommended the ineligibility of the nominations in meetings held on April 27.

But in an ordinary meeting held on the same day (Apr.27), the shareholders decided to approve the nominations, despite the committee’s and the board’s decisions. Eletrobras holds 67.95% of Eletronuclear’s capital, and ENBPar, 32.05%.

Eletrobras told the report that the nominations are by State Law.

The company states that a section of the legislation “considers independent the directors elected by minority shareholders.”

According to Eletrobras, the company is not an affiliate of Eletronuclear, but a minority shareholder, which would not fit into the prohibition indicated by the legal opinion.

According to the legal opinion, “to say that those elected by minority shareholders […] should be considered independent members of the Board of Directors does not mean to create a hypothesis of exclusion from the application of the independence requirements”.

In practice, with the appointment, the two vice presidents of Eletrobras now occupy two of the seven seats on the Board of Directors.

Eletrobras gains more power on the Board of Directors when BNDES (National Bank of Economic and Social Development) defines the modeling of the energy tariff for Angra 3.

The tariff will remunerate the state-owned company for the energy generated and pay for the financing to complete the plant’s construction.

Angra 3 has been under construction since 1984 and depends on R$17 billion in investments for its completion.

With the privatization, Eletrobras has committed to providing guarantees for the financing coordinated by BNDES and loans to Eletronuclear to complete the plant.

Here is the full response of Eletrobras to Poder360:

“Eletrobras’s appointment is based on the provisions of paragraph 4 of art. 22 of the State Companies Act considers the directors elected by minority shareholders independent.”

“As Eletrobras is a minority shareholder and not a company related to Eletronuclear, article 22, paragraph 1, item IV of the same State Companies Act is not applicable”.

With information from Poder360

News Brazil, English news Brazil, Brazilian energy sector, Eletrobras