SAO PAULO, June 9 (Reuters) - Eletrobras, Latin
America's largest power generation and transmission company, may
become a major force in energy transition after a share offering
expected to privatize it on Thursday.
The Brazilian company, formally known as Centrais Eletricas
Brasileiras, is likely to expand wind and solar generation,
adding to its strong base of hydroelectric dams, said consultant
Luiz Augusto Barroso. It foreshadows such investments in the
prospectus for the offering.
Eletrobras is also expected to cut costs after
Although the sale will be worth less than recent asset
disposals by Petrobras and operating licenses for large
airports, Brazil has not privatized a large utility since the
sale of former telecom monopoly Telebras in 1998.
The sale of Eletrobras shares may raise around 35 billion
reais ($7.1 billion), whereas the different companies that
Telebras was broken into were sold for $20 billion, said Rafael
Souza, researcher at Fundacao Getulio Vargas.
Analysts see benefits in cost reductions and easier access
to capital to invest in new technology and renewable sources.
The offering will be priced on Thursday, with bidders
including Canada's CPPIB and Singaporean state investor GIC.
Demand on Thursday had already reached 50 billion reais, two
Initially, the government will dilute its stake from 72% to
45%. By ceasing to be a majority shareholder, it may give the
company more access to foreign projects.
Eletrobras could contribute to energy transmission and
regional energy integration by participating in cross-border
In the prospectus, Eletrobras mentions renewables,
transmission, artificial intelligence, blockchain technology and
energy storage as possible destinations for capital.
The governance framework designed for the privatization has
evolved from that of companies sold in the 1990s, said Fabio
Coelho, head of the Capital Markets Investors Association. At
that time, buyers were a few pension funds and institutional
Rules mandating dispersed ownership follow similar measures
adopted in Europe when large state-owned power companies were
privatized, said Coelho, citing Italy's Enel SpA and
EDP as examples.
An investor or group of investors that reaches a stake above
50% of voting capital must offer to buy all other shares at
double the highest price reached in the previous two years.
Reducing Eletrobras's corporate structure is expected to
bring savings. The holding company has five large subsidiaries,
32 directors, 44 board members and 10,000 employees.
"Once the company becomes a corporation with dispersed
capital, it will cut costs, better manage its balance sheet and
grow. A lower cost of capital will be one of the main drivers of
higher value", UBS analysts Giuliano Ajeje and Guilherme Reif
Analysts also expect gradual resolution of large liabilities
involving litigation, currently around $17.6 billion. Private
companies have more incentive to settle than state-controlled
ones, because state employees are subject to lawsuits related to
the use of public funds, said lawyers Ana Karina Souza and Joao
Reis with the law firm Machado Meyer.
($1 = 4.8988 reais)
(Reporting by Leticia Fucushima; Editing by Christian Plumb and