Brazil and Eletrobras Reach Agreement to Strengthen State…

The Brazilian government has reached an agreement with Eletrobras to enhance state control by allowing the appointment of three board members, while relieving the company of future investments in the Angra 3 nuclear project. The deal, resulting from mediation, aims to restore influence following Eletrobras’ privatization in 2022 and is perceived positively by investors, reflected in a share price surge.

The Brazilian government and Eletrobras have finalized a deal aimed at increasing state influence in the utility and relieving the company from obligations related to the controversial Angra 3 nuclear plant. Under this arrangement, the government will have the authority to appoint three members to Eletrobras’ board of directors, which will be expanded from nine to ten members, while the company will no longer be required to invest in Angra 3.

This agreement is the result of negotiations that have unfolded since 2023, as the government sought to re-establish a level of control over Eletrobras commensurate with its ownership stake following the company’s privatization in 2022. Brazil retains ownership of over 40% of Eletrobras’ common shares; however, the privatization terms limit the government’s voting power to no more than 10% of that stake.

Leftist President Luiz Inácio Lula da Silva has criticized the previous administration’s privatization approach. In response to his request for increased voting power, the Supreme Court directed both parties towards mediation. The new agreement preserves the 10% voting power limitation but allows for the government to appoint three board members, enhancing its role in corporate governance.

Energy Minister Alexandre Silveira articulated his concerns regarding the privatization, stating that the optimal outcome would have been the retention of Eletrobras as a state-owned entity. He described the current agreement as the most favorable solution given the circumstances. This agreement aims at increasing crucial investments to bolster employment and income while affording the government greater influence over strategic decisions at Eletrobras.

The settlement has also addressed earlier disputes related to Eletronuclear, the state-operated entity of which Eletrobras is a stakeholder, and the ongoing completion of Angra 3. Eletrobras will not be obliged to make further capital expenditures for Angra 3 but will maintain liability for existing loans amounting to $1.05 billion attributed to the long-delayed project. Furthermore, Eletrobras will subscribe to debentures totaling 2.4 billion reais to extend the operational lifetime of the Angra 1 facility.

In conclusion, the recent agreement between the Brazilian government and Eletrobras marks a significant shift towards enhancing state influence in the utility sector and alleviating financial burdens associated with the Angra 3 nuclear project. With the government set to appoint board members and the suspension of further capital commitments to Angra 3, this arrangement reflects the administration’s intent to bolster its role in strategic utilities and drive investment towards employment and economic growth.

Original Source: energy.economictimes.indiatimes.com