TCU Forms Majority For Privatization Of Eletrobras

TCU Forms Majority To Approve Privatization Of Eletrobras And Ministers Announce Favorable Vote For Project

The Federal Court of Accounts (TCU) formed a majority this Wednesday (18), as indicated by the votes of the ministers, to validate the second phase of the privatization process of Eletrobras, where the Union could no longer control most of Eletrobras’s profits.
The vote of the secretary, Minister Aroldo Cedraz, supported the privatization process of Eletrobras, accepted several proposals from the technical unit and the Public Ministry, and proposed some changes to the model proposed by the government.

Cedraz joined Ministers Benjamin Zymler and Bruno Dantas. Ministers Walton Alencar Rodrigues, Jorge Oliveira, Antonio Anastasia, and Augusto Nardes have not voted yet. “I lean towards waiting for the final draft from Minister Jorge to position myself; I just want to make a record of my opinion. But I must follow Ministers Walton, Jorge, Aroldo, and Bruno,” said Nardes.

The TCU’s decision includes a second phase of analysis of the privatization, concerning simulations of the procedure. Until February of this year, the agency had already approved the resources from the amount moved by the privatization process of Eletrobras, amounting to R$ 67 billion.

With the new approval, the government expects to carry out stock offerings of the company by July, without having to insert the privatization of Eletrobras into the electoral window from the second half of the year.

This Wednesday, Minister Vital do Rêgo, in his vote, highlighted six possible irregularities in the process, including the valuation of Itaipu and actions linked to Eletronuclear, criticizing the government’s lack of transparency, errors in Eletrobras’s accounting, and proposed a suspension of the Eletrobras privatization project until the TCU is investigated regarding provisions. However, Rêgo was not supported by the other present ministers.

Vital do Rêgo admitted that he apparently lost his position to the majority of the assembly, but said that the prices presented need to be verified. Minister Zymler defended characteristics of Eletrobras on how to improve the pricing structure definition, as a recommendation and proposal, to clarify the studies.

Impediments In TCU

The judgment through the TCU, which aims at the privatization of Eletrobras, began in April but was postponed after Minister Vital do Rêgo requested a review.

Initially, the analysis time requested by Vital was 60 days, which would make privatization unfeasible this year. However, at the request of partners, the deadline was reduced to 20 days.
During the TCU session last Wednesday (11), the minister advanced some aspects of his vote and the issues he had found.
The minister stated that he identified the “high accounting of provisions for contingencies” and decided that the technical center of the TCU would have to open an internal investigation to verify the situation. The provisions refer to financial liabilities with uncertain value or payment date.
According to him, the problem was that, in the third quarter of 2021, Eletrobras raised the individual provisioning price from R$ 17 billion to R$ 26 billion to meet judicial rulings against state-owned companies, but without a fixed payment deadline.
The minister understands that if the privatization of Eletrobras is approved and the value is converted in favor of the company, current shareholders will lose the resources they invested.
The minister Vital also requested a view in the judgment of the first part of the Eletrobras privatization process, in which he disagreed with the government’s accounts regarding the concession price that Eletrobras would require to pay for the operation of the hydropower plants.

At that time, the process was postponed in 2021 and resumed in February 2022, but the minister’s position did not receive much support, following only the reforms proposed by Aroldo Cedraz.