About to be approved, Eletrobras’ MP displeases industry and energy sectors – 06/10/2021 – Folha Seminars

On the eve of being voted on in the Senate, the MP (provisional measure) for the privatization of Eletrobras is criticized by entities linked to the industry and the electricity sector, which are seeking a final dialogue with parliamentarians in an attempt to change its content.

The MP was sent by the government to the Legislature in February and expires soon, on June 22nd. The text was approved in the Chamber, three weeks ago, with a free hand — there were 313 votes in favour, 166 against and 5 abstentions. But it was in this process that the imbroglio that now bothers part of the market was born.

The central objective of the measure was to increase Eletrobras’ share capital through the issuance of common shares (which give the right to vote), and thus reduce the Union’s participation, which today corresponds to about 52%. This remains, but the new text has been added to. The main ones are the mandatory contracting of energy from gas-fired thermoelectric plants and the prioritization of small hydroelectric plants (up to 50 megawatts) in the next new energy auctions, scheduled for September.

Critics of the text have dubbed these addendums “tortoises” — referring to amendments that alter or distort the initial objective of an MP or a bill. They argue that this creates a market reserve and, consequently, reduces competition in the energy sector.

In the few days that are left until the measure expires, it must still go through the Senate and, in case the senators make changes, it comes back for discussion in the Chamber.

“We are all in favor of privatization [da Eletrobras], but we want the process to take place in a way that modernizes the electrical system, and not ‘demodernizes’ it”, declared the president of Abrace (Brazilian Association of Large Industrial Consumers of Energy and Free Consumers), Paulo Pedrosa, during a seminar held by leaf this Thursday morning (10).

He criticized the expansion of the MP’s content beyond the capitalization project, in what he defines as a “mini-reform of the electricity sector decided in ten days of discussion in the Chamber”.

In a similar vein, the IBP (Brazilian Institute of Oil and Gas) defends the initial objective of the measure, but questions the option for gas-fired thermal plants and also the areas where they are located — the Chamber’s version imposes the hiring of 6 gigawatts (GW ) in thermals in the North, Northeast and Midwest regions.

“These thermal plants will hardly be supplied by domestic gas, because there is a distance and an infrastructure cost that will be necessary to make the arrival of the gas viable [concentrado principalmente na costa brasileira] at the plants”, argued the executive director of natural gas at the IBP, Sylvie D’Apote.

The institute’s calculations suggest that the compulsory hiring, as proposed by the provisional measure, could generate losses of R$ 600 million per year in royalties.

The rapporteur of the matter in the Chamber, Deputy Elmar Nascimento (DEM-BA), responded to the criticisms saying that the arguments of the sectors look only at the market, and not at the citizen. “We [Congresso] we defend the interests of the people and they, of the big consumers.”

The congressman believes that the contracting of thermal power plants is part of a regional development policy, as the gas pipelines unfold into opportunities to boost the local industry and attract labor. “Does central Brazil not have the right to have gas? ”, he asked.

D’Apote, from the IBP, noted that, instead of leveraging the potential for regional economic development, the MP can reduce it as it imposes thermoelectric plants without taking into account other local characteristics.

“Just as there are regions that have gas production and could leverage themselves, others should be developed based on other renewable resources, important in the energy transition era,” he said. “The Northeast, for example, has a clear advantage in renewable sources.”

Despite differences with market sectors, the Chamber’s text receives support from the federal government.

Also present at the seminar, the head of the Special Advisory for Economic Affairs of the Ministry of Mines (MME) and Energy, Hailton Madureira, said that the portfolio “is convinced that the text approved by the Chamber, as a whole, is positive, as it allows the increase of competitiveness and the reduction of the tariff”.

Madureira added that capitalization should make the company more competitive. “Eletrobras has not won an auction in Brazil since 2014. Capitalized and more robust, it will be able to participate in transmission and generation auctions.”

​In a note published on Wednesday (9), the MME projected that, as it stands, the MP would lead to an average tariff reduction of 6.34% on the energy bill —in a conservative scenario, the reduction would be 5.1% ; in bold, 7.3%.


watch the debate:

Paulo Pedrosa, from Abrace, said that it is a mistake not to think about the impacts on the industry as well. “It is a mistake to understand that reducing the small consumer’s tariff is the best way. The Brazilian family consumes three times more energy in products [por meio dos tributos] than on the energy bill you pay; energy is in the milk, in the chicken.”

Deputy Elmar Nascimento disagreed. “I no longer accept this backward Robin Hood policy that the poor will finance the rich, as they are defending here.”

He says he believes that, if changes are made, the Senate will only add amendments that allow for greater regional development, in accordance with state interests represented by the House’s parliamentarians. In the event that points such as the reservation for the purchase of thermoelectric and hydroelectric plants are removed, he does not say he is worried. “As the MP returns to the Chamber, it is already clear that the house is determined to correct mistakes.”

The rapporteur for the content in the Senate is congressman Marcos Rogério (DEM-RO), an ally of the government. At a press conference on Wednesday (9), he said he was still gathering information and proposed amendments to the text. “There is no point, other than capitalization, that is defined. Everything is on the table, in dialogue with the senators, the Ministry of Mines and Energy and Aneel [Agência Nacional de Energia Elétrica]”, he declared.

With him was minister Bento Albuquerque (MME). He again signaled the portfolio’s support for the text written by the Chamber.

Asked about the compulsory contracting of gas thermal plants, he said that “natural gas has been an important source of transition to a cleaner energy matrix. This is already happening in Brazil and will accelerate with the MP.”

The seminar was mediated by the journalist and columnist from leaf Vinicius Torres Freire and was sponsored by the Brazilian Institute of Oil and Gas and União Pela Energia.


X-ray

Eletrobras

  • More than 120 power generation plants, 80% of which are hydraulic based
  • Installed capacity greater than 51 thousand MW
  • 366 electric power substations

Main points of the MP

  • Privatization through capitalization, with the issuance of common shares (with voting rights) without the Union buying the shares, diluting the share it owns in the company
  • It requires a corporate restructuring, with the creation of a state-owned company that will keep Eletrobras Termonuclear and Itaipu Binacional under federal control
  • It requires the contracting of natural gas thermals, small hydroelectric plants and extends the Proinfra (Incentive Program for Alternative Sources of Electric Energy)
  • Employees will be able to buy remaining shares of the Union; the Executive will be able to use them in other public companies
  • Funds from the grant and eventual surplus of the new state-owned company will be allocated to the CDE (Energy Development Account) to lower costs for homes and small businesses
  • A quarter of the new state’s surplus will be allocated to income transfer programs

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