Brazil’s government and Eletrobras reached an agreement allowing the state to appoint three board members while eliminating future funding obligations for the Angra 3 nuclear plant. The government retains over 40% ownership but voting rights are capped at 10%. Eletrobras shares rose 5% following the announcement, reflecting positive market sentiment regarding the agreement.
The Brazilian government and Eletrobras have finalized an agreement during a mediation process that will permit the state to appoint three members to the company’s board of directors. This agreement alleviates Eletrobras from any further obligations regarding investments in the controversial Angra 3 nuclear plant. Since 2023, both parties have been negotiating to restore governmental influence within Eletrobras following its privatization in 2022.
Eletrobras indicated in a recent filing that both parties will collaborate on establishing a conciliation term, which is subject to approval from the company’s shareholders and validation by Brazil’s Supreme Court. The announcement triggered a positive response in the market, with Eletrobras shares on the Sao Paulo exchange increasing over 5%, boosting its position on the Bovespa stock index, as analysts viewed the agreement as a means of reducing risk for the company.
The Brazilian government holds more than 40% of Eletrobras’ common shares, yet post-privatization regulations only allow a maximum of 10% of this stake to exert voting influence. Leftist President Luiz Inacio Lula da Silva has been vocal against the previous administration’s privatization efforts and has sought to regain proportional voting rights via a Supreme Court request, which initiated the mediation process.
Per the newly established terms, the voting power cap will be preserved while allowing the government to appoint three members to the expanded board, which will now consist of ten directors instead of nine. Analysts at Itau BBA have described the deal positively, noting that the inclusion of government-appointed members aligns with market expectations.
The agreement also resolves specific issues surrounding Eletronuclear, a state-owned nuclear energy firm in which Eletrobras holds an investment. Eletrobras is relieved of the obligation to contribute further funds for the Angra 3 project while retaining responsibility for guaranteeing a loan of 6.1 billion reais related to the plant’s long construction history. Furthermore, Eletrobras will subscribe to 2.4 billion-real debentures to sustain the Angra 1 plant’s operational life.
The government has consented to support any divestment efforts by Eletrobras concerning its stake in Eletronuclear.
“The main positive among the terms is that Eletrobras would no longer be committed to future capital increases to fund Angra 3,” stated analysts at JPMorgan, emphasizing that the persistence of the voting cap is also favorable.
In conclusion, the recent agreement between the Brazilian government and Eletrobras marks a significant shift in corporate governance, allowing the state increased influence while alleviating financial obligations regarding the Angra 3 nuclear plant. Analysts have generally perceived this deal positively, with expected benefits for both Eletrobras and its shareholders. This collaborative effort marks a notable development since the company’s privatization in 2022 and may enhance Eletrobras’ market positioning moving forward.
Original Source: www.tradingview.com
