BRASILIA, (Reuters) – Brazil’s government, through its Investment Partnerships Program (PPI), gave the green light yesterday for the privatization of Latin America’s largest utility Eletrobras by floating shares to dilute the state’s 61% shareholding.
The government’s stake will be cut to 45% or less in Centrais Eletricas Brasileiras SA, as the company is formally called, with the state retaining a golden share to veto hostile takeovers and preventing any other shareholder owning more than 10%.
Currently, almost 40% of Eletrobras is listed on the stock market. The government hopes to raise 50 billion reais ($9 billion) from the sell-down of its shares.
The PPI’s council also authorized the use of up to 6 billion reais from the Eletrobras employee severance and indemnity fund so that employees and retirees can buy shares up to a 10% stake in the utility.
If the float fails to reduce the state’s share of voting capital to 45% or less, the council authorized the direct sale of shares held by the state in a secondary offering.
Two units of Eletrobras will be split off and kept under government control: Eletronuclear, which manages Brazil’s two nuclear reactors and is building a third; and the country’s largest hydroelectric dam Itaipu, a joint venture with Paraguay.
“This approval is a crucial step in the privatization of Eletrobras,” said the head of PPI, Martha Seillier.
Besides approving the privatization model, the decision sends a clear signal to the market and Brazilian society that the government is committed to privatizing Eletrobras to help reduce its budget deficit, she said.
