Brazil’s government has secured a deal with Eletrobras allowing it to appoint three board members while relieving the company of further investment responsibilities in the Angra 3 nuclear plant. This development follows ongoing negotiations since 2023 aimed at increasing government influence after the firm’s privatization in 2022. Following the announcement, Eletrobras shares surged over 5%, reflecting positive investor sentiment regarding the agreement’s potential to mitigate risks.
The government of Brazil and Eletrobras have reached a significant agreement aimed at enhancing state influence in the company while alleviating financial responsibilities concerning the Angra 3 nuclear power plant. This arrangement allows the government to appoint three members to Eletrobras’s board and relieves the company from making new investments in Angra 3, which has faced considerable controversy. Following this announcement, shares of Eletrobras traded in São Paulo surged by over 5%, reflecting optimism among analysts regarding the reduction of risks facing Latin America’s largest utility.
This agreement is the culmination of ongoing negotiations that began in 2023, as the current administration sought to restore influence in Eletrobras after its privatization in 2022. Although the Brazilian government currently holds more than 40% of the firm’s common shares, its voting power is limited to 10% under previous privatization terms. President Luiz Inacio Lula da Silva has strongly criticized the prior government’s move to privatize Eletrobras and sought constitutional backing from the Supreme Court for enhanced voting rights.
While the 10% voting power cap will remain in place, the new agreement expands the board of directors from nine to ten members, allowing for additional government representation. Energy Minister Alexandre Silveira expressed that the ideal outcome would have been to prevent the privatization altogether. However, he stated that the current agreement represents the best achievable resolution under existing circumstances, enhancing governmental oversight in Eletrobras’s strategic matters.
Financial analysts, such as those from Itau BBA, have responded positively to the agreement’s terms, indicating that the appointment of three government-nominated directors aligns with their expectations. The deal has also addressed unresolved issues tied to Eletronuclear, the state-run nuclear power firm. Importantly, Eletrobras will not be mandated to invest further capital into the completion of Angra 3, although it is responsible for ensuring existing loans of $1.05 billion for the project.
In addition to the prior commitments, Eletrobras plans to subscribe to debentures amounting to 2.4 billion reais issued by Eletronuclear to prolong the operational life of the Angra 1 plant. The government has agreed to support Eletrobras if it decides to divest its stake in Eletronuclear. Analysts from JPMorgan have noted that the elimination of future capital obligations for Angra 3 is a positive aspect of the agreement, alongside the retention of the voting cap, which they consider beneficial for the company’s ongoing stability.
In summary, the agreement between the Brazilian government and Eletrobras signifies a pivotal shift towards increased governmental control and reduced financial liabilities relating to the Angra 3 nuclear plant. With the government gaining board representation while maintaining existing voting limits, the deal aims to stabilize Eletrobras and enhance its strategic direction amid ongoing criticism of prior privatization efforts. Analysts view the terms of the agreement as favorable, potentially lessening broader financial risks in the energy sector.
Original Source: energy.economictimes.indiatimes.com
