Brazil’s Eletrobras should invest US$2.8 billion a year after it is privatized – minister

RIO DE JANEIRO, BRAZIL – The Brazilian power utility giant Eletrobras, the largest electric company in Latin America, will invest up to R$14 (US$2.8) billion a year when it is privatized, said Thursday Brazil’s Minister of Mines and Energy, Bento Albuquerque.

“Because it is a state-owned company, today the company has many restrictions on investing and for this reason it has lost its investment capacity, something it will only regain when it is no longer controlled by the state and is capitalized,” Albuquerque said in an interview with foreign correspondents in Brazil.

The minister explained that Eletrobras is currently responsible for about 30% of the energy generated by Brazil and for 45% of transmission. To maintain or increase this share, it needs to increase its investments significantly.

“To maintain its current share in the energy matrix, Eletrobras needs to invest at least R$14 billion a year and only manages to invest R$3 billion (about US$600 million), less than a quarter,” he explained.

“Eletrobras has not managed to win a concession to generate energy or to lay transmission lines since 2003 for lack of resources. Only with deregulation and capitalization will it have the opportunity to make the investments it needs,” he added.

The capitalization will be possible thanks to the fact that in June Congress approved the privatization model for the state-owned company, which will be the largest in the country’s history as it will yield the State close to R$100 (US$20) billion.

The approved model foresees a capitalization of the company without the participation of the State and the subsequent sale of the shares remaining in the hands of the public sector.

The Brazilian state currently owns 60% of the shares of Eletrobras, the country’s largest electricity generator and transmitter, a percentage that will be reduced to around 45% after the capitalization, for which the company will carry out a public offering of shares on the stock exchange in which the State will abstain from participating.

Despite the sale of control, the process guarantees the Brazilian state a “golden share” in the company, giving it veto power in the company’s strategic decisions.

According to government projections, the first stage of the privatization process, i.e., the company’s capitalization, may be concluded in February 2022. “The capitalization of Eletrobras is an important part of the modernization process of the electricity sector and was a 20-year demand,” said Albuquerque.

“The benefits will be important for the electricity sector because of what the largest renewable energy generation company in Latin America represents for the electricity system,” he added.

According to the minister, a large part of the resources obtained with the privatization will be used in programs to reduce the tariff impact of the process on consumers and another important part in regional projects, mainly for the revitalization of rivers and dams, to prevent the country from suffering threats of rationing such as the current one due to the historic drought.

In addition to guaranteeing that the private sector will make the investments needed by the company, the process will allow “consumer tariffs to be reduced by between 6% and 7% according to our calculations”, he stated.