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Brazil’s Eletrobras Expects Up To $4B Proceeds From Share Sale

Brazilian state-controlled utility giant Eletrobras expects the share sale part of its upcoming privatization to raise between US$3 billion and US$4 billion, Eletrobras chief executive Wilson Ferreira Jr. told Brazilian newspaper Valor Economico.

Last year, Brazil announced that it would put up for privatization 57 major state infrastructure assets, including selling some or all of its 51-percent stake in Centrais Eletricas Brasileiras—as Eletrobras is officially named—this year.

Eletrobras controls transmission lines and electric generating plants throughout Brazil, and owns power distribution companies that are now being sold. Eletrobras accounts for almost one third of Brazil’s power-generating capacity and almost one half of the nation’s high-voltage transmission network.

Last week, Brazil announced an initial draft bill for Eletrobras’ privatization, in which the government offered to dilute its controlling stake in the utility group by a capital increase, and a possible secondary offering of state-held shares. The government also plans to have a golden share and any private shareholders will have their voting rights limited to up to 10 percent each, regardless of the actual stake of equity they hold in Eletrobras after the privatization. 

The exact terms of the Eletrobras privatization are expected to be finalized by the middle of August, Ferreira Jr. told Valor Economico.

Related: Largest Oil Consumers Not In A Rush To Hedge Crude

The Eletrobras share sale is expected to be the largest privatization in Brazil in the past 20 years.

The government’s plan to privatize Eletrobras is credit positive for the company, because “a cash injection through an equity offering would improve its financial risk profile at a time when the government is contending with its own fiscal problems and has reduced ability to support funding the company’s requirements,” Moody’s Investors Service said last week.

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However, the rating agency also cautioned that “evolving political considerations” could make the privatization plan very difficult to execute this year.   

By Tsvetana Paraskova for Oilprice.com

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