Centrais Eletricas Brasileiras S A Eletrobrás : Provisional Measure - Eletrobras Privatization

PROVISIONAL MEASURE No. 1031, of February 23, 2021

Provides for the privatization of Centrais

Elétricas Brasileiras S.A. - Eletrobras and

amends Law No. 5,899, of July 5, 1973, Law

No. 9,991 of July 24, 2000, and Law No. 10,438,

of April 26, 2002.

THE PRESIDENT OF THE FEDERATIVE REPUBLIC OF BRAZIL, using the powers conferred on him by art. 62 of the Constitution, adopts the following Provisional Measure, with force of law:

CHAPTER I

PRIVATIZATION OF ELETROBRAS

Art. 1. The privatization of Centrais Elétricas Brasileiras S.A. - Eletrobras will take place as provided for in Law No. 9,491, of September 9, 1997, and will be conditioned on the granting of a new electric power generation concession for the Concession Contract Nº 007/2004-Aneel-Eletronorte, signed by the Federal Government and Centrais Elétricas do Norte do Brasil S.A., for a period of thirty years, counting from the date of signing of the new contract, under the rules and conditions established in this Provisional Measure.

§1. The privatization of Eletrobras will be carried out in the form of a capital increase, through the public subscription of ordinary shares with a renunciation by the Federal Government of its subscription rights.

§2. The share capital increase of Eletrobras may be accompanied by a public secondary offering of shares owned by the Federal Government or a company controlled by Brazil, directly or indirectly.

§3. The National Bank for Economic and Social Development - BNDES is responsible for executing and monitoring Eletrobras' privatization process.

§4 BNDES may hire the specialized technical services necessary for Eletrobras' privatization process.

§5. The Council for the Investment Partnership Program of the Presidency of the Republic

-CPPI may establish attributions to BNDES and Eletrobras, necessary for the privatization process object of this Provisional Measure.

Art. 2. For the promotion of the privatization referred to in this Provisional Measure, the

Federal Government is authorized to grant, for a period of thirty years, counted from the date of the signing of the new contracts, new grants for electricity generation concessions under ownership or control, directly or indirectly, of Eletrobras:

I - that have been extended under the terms of art. 1 of Law No. 12,783, of January 11, 2013;

• II - achieved by the provisions of item II of § 2 of art. 22 of Law No. 11,943, of May 28, 2009;

• III - achieved by the provisions of § 3 of art. 10 of Law No. 13,182, of November 3, 2015;

• IV - Granted through the Concession Contract No. 007/2004-Aneel-Eletronorte.

CHAPTER II

CONDITIONS FOR THE PRIVATIZATION OF ELETROBRAS

Art. 3. The privatization of Eletrobras is conditioned on approval by its general shareholders' meeting of the following conditions:

I - corporate restructuring to maintain under the control, directly or indirectly, of the

Federal Government, the companies:

• a) Eletrobras Termonuclear S.A. - Eletronuclear; and

• b) Itaipu Binacional;

II - execution of the new electricity concession contracts referred to in art. 2, to replace the contracts in force on the date of publication of this Provisional Measure, with the alteration of the operating regime for independent production, on the terms set out in Law No. 9,074, of July 7, 1995, including the conditions for the termination of the grants, the expropriation of the facilities and the indemnification;

III - amendment of the bylaws of Eletrobras to:

a) prohibit any shareholder or group of shareholders from exercising votes in excess of ten percent of the quantity of shares in which the voting capital of Eletrobras is divided; and

b) prohibit the entry into shareholders' agreements for the exercise of voting rights, except for the formation of blocks with voting numbers lower than the limit referred to in item "a"; and

c) create a special class preferred shares, exclusively owned by the Federal Government, pursuant to the provisions of §7 of art. 17 of Law 6,404, of December 15, 1976, which will give the power of veto in the corporate resolutions related to the matters mentioned in item III of the heading;

IV - maintenance of the payment of membership contributions to the Centro de Pesquisas de Energia Elétrica - Cepel, for a period of four years, counting from the date of the privatization; and

V - development of a revitalization programs for the:

a) revitalization of water resources in the Rio São Francisco basin, directly by Eletrobras or, indirectly, through its subsidiary Companhia Hidro-Elétrica do São Francisco - Chesf;

b) structural reduction of power generation costs in the Legal Amazon, directly by

Eletrobras or, indirectly, through its subsidiary Centrais Elétricas do Norte do Brasil S.A. - Eletronorte; and

c) revitalization of the water resources of the hydrographic basins in the area of influence of the reservoirs of the hydroelectric plants of Furnas Centrais Elétricas S.A. - Furnas, whose concession contracts are affected by this Provisional Measure, directly by Eletrobras or, indirectly, through its subsidiary Furnas.

§1. The CPPI, in exercising the authority described in item II of the heading of art. 6 of Law

No. 9,491, of 1997, may establish additional conditions to those provided in the heading for approval by the general assembly of Eletrobras for its privatization.

§2. The effectiveness of the measures established in the heading and in §1 is subject to the privatization referred to in art. 1.

§3. Eletrobras shall remain responsible for recomposing the debt and resources before the

Global Reversal Reserve - RGR, as per art. 21-A of Law No. 12,783 of 2013.

§4. The associative contribution described in item IV of the heading shall:

I - be limited to the amount actually paid by Eletrobras and its subsidiaries in the year 2020; and

II - from the second year after this Provisional Measure comes into effect, be reduced by twenty-five percent per year and corrected by the Broad Consumer Price Index - IPCA, published by the Brazilian Institute of Geography and Statistics - IBGE, or another index that may replace it, based on the amount of the contribution paid in the first year.

§5. The associative contribution referred to in item IV of the heading shall be given the sametreatment as that referred to in §3 of art. 4 of Law no. 9991 of July 24, 2000, for the period of four years from the date of the privatization.

§6. The Federal Government is prohibited from exercising, directly or indirectly, in the resolutions of the general assembly of Eletrobras' shareholders that are made prior to the privatization, the right to vote on the matters addressed in items II to V of the heading and in § 1 and § 4.

Art. 4. The conditions for the new concession award for the generation of electric power referred to in art. 2 are:

I - the payment, by Eletrobras or its subsidiaries, throughout the concession period, of an annual quota, in the twelve-month periods, to the Account for Energy Development - CDE, referred to in Law No. 10,438, of April 26, 2002, corresponding to fifty percent of the value added to the concession by the new contracts;

II - the payment, by Eletrobras or its subsidiaries, of a bonus for granting new electric power generation concession contracts corresponding to fifty percent of the value added to the concession by the new contracts;

III - the change of the exploitation regime to independent production, under the terms of the provisions of Law No. 9.074, of 1995, including the conditions for the extinction of the concessions, the transfer of installations and indemnities; and

IV - the assumption of hydrological risk management, with no renegotiation allowed under the provisions of Law No. 13,203, dated December 8, 2015.

§1. The new generation concession contract for the power plants affected by the provisions of item II of §2 of art. 22 of Law No. 11,943, of 2009, and in §3 of art. 10 of Law No. 13,182, of 2015, shall preserve the obligations established in art. 22 of Law No. 11,943, of 2009, and in art. 10 of Law No. 13,182, of 2015, in compliance with the conditions and validity of the current electric power sales contracts referred to in the referred arts.

§2. The provisions of art. 7 of Law no. 9,648, of May 27, 1998, do not apply to the new concession contracts for the generation of electric power referred to in this article.

Art. 5. The National Council for Energy Policy (CNPE) shall be responsible for establishing the value added by new electric power generation concession contracts and for fixing the values referred to in items I and II of the heading of art. 4.

§1. For the calculation of the value added to the concession, the following will be considered:

• I - the change of the exploitation regime to independent production;

• II - the deduction of credits relating to the reimbursement for proven expenses for the acquisition of fuel, incurred up to June 30, 2017, by concessionaires that were controlled by Eletrobras and holders of the concessions dealt with in art. 4-A of Law No. 12. 111, of December 9, 2009, which have been proven, but not reimbursed, due to the economic and energy efficiency requirements dealt with in §12 of art. 3 of this law, including monetary restatements, in which case the compensation will be limited to R$3,500,000,000.00 (three billion and five hundred million reais);

III - the termination of the electric power contracted under the provisions of art. 1 of Law No.

12.783, of 2013, to comply with the provisions of item III of the heading of art. 4 of this Provisional Measure, in a gradual and uniform manner, within a minimum period of three years and a maximum period of ten years;

IV - the expenses for the revitalization of the water resources of the São Francisco River basin, pursuant to the provisions of item "a" of item V of the heading of art. 3;

V - expenses for the development of projects in the Legal Amazon aimed at structurally reducing the costs of power generation, in accordance with the provisions of subparagraph "b" of item V of the heading of art. 3; and

VI - the expenses for projects in the area of influence of the reservoirs of the Furnas hydroelectric plants whose concession contracts are affected by this Provisional Measure, in accordance with the provisions of item "c" of item V of the heading of art. 3.

§2.

In calculating the value added to the concession, the adjustments described insubparagraph "b" of item II of the heading of art. 6 of Law no. 9,491, of 1997, may be considered, provided they are relative to obligations recognized by the Federal Government with Eletrobras.

§3. Recognition of the credits referred to in item II of § 1 shall imply their settlement.

§4. The Ministry of Mines and Energy and the Ministry of the Economy shall be responsible for proposing the values that will be fixed in accordance with the provisions in the heading.

Art. 6. It will constitute an obligation for the electric power generation concessionaires located in the basin of the São Francisco River whose concession contracts are affected by this Provisional Measure, in order to comply with the measure referred to in subparagraph "a" of clause V of the heading of art. 3, to contribute R$350,000,000.00 (three hundred and fifty million reais) annually, for a period of ten years, adjusted by the IPCA, published by the IBGE, or another index that may replace it, from the month of signing the new concession contracts.

§1. The form of application of the amounts referred to in the heading and the projects that will comprise the São Francisco basin program for the revitalization of water resources which shall receive the funds for the compliance with the measure referred to in line 'a' of item V of the heading of art. 3 shall be set forth by the management committee, which will be instituted by regulation of the Federal Government with a focus on the share actions that generate recharge of tributary flows and increase the operational flexibility of the reservoirs, without harming the priority use and multiple use of water resources.

§2. Eletrobras shall be obligated to annually contribute the totality of the amounts referred to in the heading to a specified account with a financial institution authorized to operate by the Central Bank of Brazil.

§3. The account referred to in §2 may not be integrated with the equity of Eletrobras for any purpose.

§4. The obligations to contribute the amounts referred to in the heading and to effect the implementation of projects set forth by the management committee shall include the concession contracts for the generation of electricity relative to the enterprises located in the Rio São Francisco basin and shall be subject to the oversight of the National Electric Power Agency - Aneel, provided for by Law No. 9,427 of December 26, 1996.

§5. At the end of the concession period, in the event of non-use of the amounts of the account referred to in §2, the remaining balance of the obligation will be reversed in favor of the Federal Government, without prejudice to administrative penalties applied by Aneel.

§6. The regulation may determine the allocation of 78.4 MWmed for a period of twenty years, counted from 2022, at the price of R$80/MWh, to be corrected by the IPCA disclosed by IBGE, or by another index that will replace it, to the operator of the São Francisco River Integration with Hydrographic Basins in the Northern Northeast Project.

§7. The economic value of the allocation referred to in §6 must be considered an essential part of the contribution provided for in the heading, as provided for in the regulation.

Art. 7. In order to comply with the measure referred to in item 'b' of item V of the heading of art. 3, the concessionaire party to Concession Agreement No. 007/2004-Aneel-Eletronorte will assume the obligation, subject to the provisions of the heading of art. 1, to contribute R$295,000,000.00 (two hundred and ninety-five million reais) per year, for a period of ten years, to be corrected by the IPCA disclosed by IBGE, or by another index that will replace it, starting from the month of execution of the new concession contract.

§1. The form of allocation of the amount referred to in the heading and the projects that will comprise the program for structural reduction of power generation costs in the Legal Amazon that will receive the contribution of resources for the fulfillment of the measure referred to in paragraph "b" of item V of the heading of art. 3 will be established by a management committee, which will be established by regulation of the Federal Government, considering the development of renewable energy or renewable fuel projects and the interconnections of isolated and remote locations.

§2. Eletrobras shall be obligated to annually contribute the totality of the amounts referred to in the heading to a specified account with a financial institution authorized to operate by the Central Bank of Brazil.