Brazil Congress Allows Eletrobras Privatization in Final Vote

Brazil’s lower house approved a plan to privatize power utility giant Eletrobras, opening the door for the government to raise an estimated 60 billion reais ($11.9 billion) through an offering of shares of the company.

Lawmakers approved the bill by 258-136 votes one day before its June 22 expiration. The privatization will allow the economy ministry to raise funds to offset part of a recent jump in electricity prices, which are expected to increase further in coming months as a drought pushes the country to use more costly thermoelectric energy in lieu of hydroelectric sources.

Common shares of Eletrobras, formally known as Centrais Eletricas Brasileiras SA, closed Monday with gains of 2.92%, before the vote. They have rallied nearly 30% so far this year on privatization hopes.

The government’s plan is to issue more common stock, diluting its stake at the company to about 45%, while keeping a so-called golden share that gives it veto power in some decisions. State-controlled companies that are part of the Eletrobras system, including the Itaipu and Eletronuclear power plants, will remain in government hands and any fusion or extinction will depend on a vote by the general assembly of each subsidiary.

Out of the 60 billion reais the economy ministry expects to raise with the sale, 25 billion will land in the treasury’s coffers. Another part of the proceeds will be used to reduce consumers’ electricity bills by up to 7.4%, according to the economy ministry, and another portion will go to public development programs.

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