September 12, 2017 / 1:50 PM / in 9 months

Brazil to release Eletrobras privatization model in September

SAO PAULO/BRASILIA (Reuters) - Brazil’s government aims to release a privatization model for the country’s largest state-owned electric utility, Centrais Eletricas Brasileiras SA, this month, the mining and energy minister said on Tuesday.

A view of the headquarters of Brazil's power company Eletrobras in downtown Rio de Janeiro August 20, 2014. REUTERS/Pilar Olivares

The government is confident it will privatize all Eletrobras electricity distributors in 2017, the minister, Fernando Coelho Filho, told reporters by phone. There are discussions about raising distributor rates ahead of the sale to boost investors interest, he said.

The government surprised the market in August by announcing the privatization of Eletrobras as it seeks to loosen the government’s grip on the economy and shore up public coffers by selling state assets.

The plan being considered would be a departure from the current quota system that keeps electricity rates low, allowing hydroelectric plants to sell their output at higher prices in exchange for paying a contract-renewal bonus to the federal government.

Eletrobras would pay for this bonus through a share offering that would dilute the government’s ownership, giving it a minority stake.

Coelho Filho said the government is discussing which plants would be allowed to abandon the quota system and under what conditions.

The minister told Reuters in August that a change in the quota system for hydropower dams would take place over five or six years to avoid abrupt rate hikes.

Reporting by Luciano Costa and Jake Spring; Editing by Chizu Nomiyama and Jeffrey Benkoe

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