A New Dawn for Eletrobras?
February 09, 2018DownloadsDownload Article
In what could become Brazil’s boldest privatization move since the 1990s, in late January President Michel Temer sent to Congress much-anticipated legislation proposing to privatize Eletrobras (or Centrais Elétricas Brasileiras S.A), one of the largest power companies in the world, and by far the largest in Latin America. The Temer administration hopes the privatization of Eletrobras, which serves as a holding company for numerous electricity generation, transmission and distribution companies throughout Brazil, will raise more than $4 billion for public coffers and overhaul Brazil’s structurally-deficient electricity market.
Investors welcomed news of the privatization, as Eletrobras has suffered from mismanagement, political interference and corruption for decades: the company’s shares jumped 49.3% immediately after Temer’s announcement. However, despite growing interest and grounds for optimism in the privatization, prudent investors should consider their prospects with a healthy degree of skepticism. The current and historical context around Eletrobras raises numerous potential impediments, risks and challenges for investors.