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Energy

Brazil's Senate approves Eletrobras privatization bill

3 minute read

A person walks past in front of the headquarters of Brazil's power company Eletrobras in Rio de Janeiro, Brazil January 3, 2019. REUTERS/Pilar Olivares

SAO PAULO, June 17 (Reuters) - Brazil's Senate voted on Thursday to approve the basic text of a bill allowing the privatization of state-controlled energy giant Eletrobras (ELET6.SA), but the measure must return to the lower house for final passage due to changes made by senators.

The legislation would privatize Latin America's biggest power utility, known formally as Centrais Eletricas Brasileiras SA, by floating shares on the stock market, with the state relinquishing control by diluting its current 61% stake.

Brazil's government expects to raise roughly 25 billion reais ($4.95 billion) from the share sale. The proceeds will go to the Treasury to pay for the renewal of concessions for Eletrobras hydroelectric plants and transmission lines.

The government will retain a golden share to veto hostile takeovers and other strategic threats.

Lower house Speaker Arthur Lira has called an extra session on Monday to vote on the bill.

The privatization of Eletrobras, proposed by President Jair Bolsonaro, has met with opposition from politicians, mainly on the left.

To win support, Congress added provisions including the mandatory commission of gas-fired thermoelectric plants in key regions that critics said would push up electricity prices.

The Senate version passed on Thursday increased the thermal gas plant requirement to 8,000 MW from 6,000 MW to include regions closer to where gas is produced, reducing imports. The plants would be built under 30-year private concessions.

Senator Marcos Rogerio, who presented the changes late on Wednesday, said the thermal plants would not increase the cost of energy. He rejected an amendment extending subsidies for coal-fired power generation.

Mines and Energy Minister Bento Albuquerque said the privatization was vital for Brazil at a time when it is facing the threat of electricity rationing due to the worst drought in nearly a century.

"The capitalization of Eletrobras will mean rates will not rise in 2022 and consumers will have better services due to more investments," Albuquerque said in an interview on GloboNews.

Reporting by Ricardo Brito, in Brasilia, and Marta Nogueira, in Rio, writing by Carolina Mandl

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