The price per common share of Eletrobras was set at R$ 42 this Thursday (9). The total of the operation should move about R$ 33.7 billion.
The price was slightly below the closing price of ELET3 on the stock exchange this Thursday, which was R$ 43.04.
The government decided to privatize Eletrobras, the main company in the Brazilian electricity sector. To this end, it will issue new shares and reduce the Union’s stake in the company.
And the largest share offering on the Brazilian stock exchange since the mega-capitalization of Petrobrasheld in 2010.
- Eletrobras privatization: see questions and answers about the operation
- Consequences: where does the money go and what will be the impact on the electricity bill?
The deadline for investors to express their intention to purchase and reserve shares began last Friday (3) and ended this Wednesday (8). The pricing of the share value depended precisely on the appetite of investors.
The offer was opened to large national and foreign investors and the demand will also be supplied with funds from the FGTS.
The government authorized the use of up to 50% of the value of the account linked to the FGTS for workers to participate in the operation. If the total amount reserved using the FGTS exceeds the ceiling of R$ 6 billion, there will be a proportional apportionment of the shares among the investors, considering the reserve request of each one of them.
O minimum price set by the government for the sale of shares is kept confidential. The offering prospectus indicates that the transaction would move R$30.69 billion, considering the closing price of Eletrobras’ common shares on May 26 (R$44).
The primary offering (of new shares) will initially be for 627,675,340 million shares. The secondary offering (existing securities) will be for 69,801,516 million shares of BNDESPar. According to the prospectus, the operation may have a supplementary lot of up to 15% of the shares of the initial offering.
The start of trading of shares on B3 will be on June 13.
See below questions and answers about privatization:
Understand the privatization of Eletrobras, the largest electricity company in Latin America
How does the privatization of Eletrobras work?
The government chose to carry out the privatization by means of capitalization: the Union will offer new Eletrobras shares on the stock exchange and, with that, will cease to be its controlling shareholder. The government’s share in the company is expected to drop to 45% stake.
The Union will have a special class preferred share, the “golden share”, which will give veto power in deliberations on the company’s bylaws. This means that, even after losing majority control, the government will continue to have veto power over certain decisions made by Eletrobras.
Where does the money from the privatization of Eletrobras go?
If it goes as planned, privatization should move R$ 67 billion over the next few years — of which R$ 25.3 billion will go directly to the government’s cash. Another 32 billion will be allocated to the Energy Development Account (CDE) to mitigate tariff readjustments and subsidize sectoral policies.
Who can buy Eletrobras shares?
The purchase of shares will be open to institutional investors and individuals. Workers can buy using the money from the Severance Indemnity Fund (FGTS), as happened with the shares of Petrobras and Vale.
Who can buy using the FGTS?
Workers from any sector who have funds in the Severance Indemnity Fund (FGTS) may use part of this balance to buy Eletrobras shares. The purchase will take place through the so-called “privatization mutual funds”, a device created in the 2000s that has already been used by the government in the sale of papers from other state-owned companies.
What is the share price?
The value of each share will be defined on June 9 and depends on demand, that is, how many investors are interested and how much each one intends to invest.
Will I be able to invest to the limit?
It is possible not. If demand is greater than the number of shares available, an apportionment will be made.
Will it be possible to redeem at any time?
For those who invest with FGTS funds, it will be necessary to wait at least 12 months to request the redemption of the shares. The money will then go back to the worker’s FGTS account, which can only be withdrawn under the conditions provided for by law, such as unfair dismissal, retirement and property acquisition, among others.
What are the characteristics of electrical roles?
Currently, there are more than 30 companies in the energy sector listed on B3. The companies operate in the generation, transmission and distribution sectors, being able to act in more than one. Eletrobras, for example, operates in both generation and transmission.
Electric utilities are considered less risky because they involve companies with long concession contracts and because it is an essential service. As they have more predictable revenues, margins and profits, they are considered a safe haven in times of crisis and good dividend payers.
The country continues to demand robust investments in the sector. In Brazil, the national system is still very dependent on the generation of energy from hydroelectric plants, but there has been an advance in wind and solar energy, amid the need to expand the more sustainable production model.
What is the difference between the action types? What will be offered?
There are two types of company shares: ELET3 and ELET6. The first, ending in 3, corresponds to common shares, which give the right to vote. “In addition, in case of sale of the company, this type of paper also guarantees the shareholder part of the value obtained from the negotiation”, explains Fabio Louzada, CNPI analyst and founder of the financial education school Eu me banco.
ELET6, on the other hand, corresponds to class B preferred shares. This means that those who buy them have preference in receiving dividends. On the other hand, they do not give the right to vote.
In this initial offering, only common shares are available. “The ELET3 shares will be sold, so that the Union will relinquish control, privatizing the company via a share offering”, says the economist.
How much is Eletrobras worth?
The current market value of Eletrobras is R$ 65.7 billion, considering the closing price of the shares on June 3rd. The value represents a jump of 25.7% compared to the end of 2021. The historical maximum was recorded in June 2021, when the company was valued at R$74.5 billion on the stock exchange, according to data from the financial information provider economics.
Was this recent appreciation speculation?
Not necessarily. Eletrobras’ shares appreciated considerably in 2022. From the beginning of the year until the market closing last Friday (3), the company’s shares were up 28.2% in ELET3 and 31.7% in ELET6.
But other companies in the electricity sector are also doing well on the stock market this year. This happens because it is common for investors to look for assets of these companies in times of more turbulent market. This is what is called in the jargon of “defensive companies”.
This attention was given because the contracts of energy companies are, in general, long-term and adjusted for inflation. Thus, there is a more constant profitability even in difficult times of the economy.
In fact, Eletrobras rises more than the others with the prospect of privatization. Today, the energy produced by the state-owned plants is sold to consumers at lower prices than those practiced by the market. With the privatization and removal of the plants from this regime, Eletrobras will be able to increase its revenue from the sale of energy at the (higher) market price.
“It is difficult to quantify how much of this recent appreciation has an effect on privatization prospects alone. But, yes, the market ‘priced’ a more positive scenario, considering that the chances of changes happening are very high”, says João Daronco, analyst at Suno Research.
Does this mean that stocks shouldn’t appreciate too much in the short term?
For João Daronco, an analyst at Suno Research, the recent appreciation of Eletrobras reduces the “safety margin” of the investment. In other words: when you buy a stock that has recently appreciated, it tends to have a lower “ceiling” to increase in volume that is interesting for the shareholder.
But there are two considerations: the FGTS yield is quite low, which makes it possible to have a more profitable investment in Eletrobras shares. Another is that investments in variable income are more advisable for those who intend to carry this investment for a longer term.
“The short term is much more driven by rumors and news than fundamentals and operational data. The investor looking at Eletrobras — and at any company listed on the stock exchange — has to pay much more attention to the long term”, says Daronco.