SAO PAULO – Investors on Tuesday welcomed the government’s proposal to privatize Eletrobras, Brazil’s largest energy company, in an effort to reduce the budget deficit.
The Energy and Mines Ministry said it planned to sell the government’s controlling stake in Eletrobras, a move that could pump some 20 billion reais (about $6.34 billion) into the Treasury and help ease the strain on public finances.
Eletrobras’s voting class shares were up about 46 percent halfway through Tuesday’s trading session on the Sao Paulo Stock Exchange, sending the power company’s market capitalization soaring from 20.17 billion reais (about $6.37 billion) to 27.45 billion reais (some $8.66 billion), consulting firm Economatica said.
The Office of the President’s PPI investment program, an inter-agency body that sets rules for the privatization of state-owned businesses, must sign off on the sale of control in Eletrobras.
The Energy and Mines Ministry’s privatization plan excludes both giant hydroelectric power plant Itaipu, which Brazil operates jointly with Paraguay, and Eletrobras’s nuclear power plants, officials said.
“If we reach the conclusion that the nuclear project cannot be privatized, as well as the Itaipu hydroelectric power plant, then these projects will be removed from the sale process. At least at first, Itaipu is out of the privatization process,” Energy and Mines Ministry executive secretary Paulo Pedrosa said in a press conference.
Brazil’s 50 percent stake in Itaipu cannot be separated from Paraguay’s 50 percent stake because the power project was created under an international treaty that supersedes domestic law, Pedrosa said.
Energy and Mines Minister Fernando Coelho, for his part, said the government wanted to finish the privatization process before the October 2018 presidential election.