Brazil on Monday floated a proposal to cede control of the country’s biggest power utility, Eletrobras, in the boldest privatization yet by a government struggling to close a record budget deficit, sending Eletrobras’ shares soaring in after-market trading.
The Mining and Energy Ministry gave Centrais Elétricas Brasileiras SA, the holding company known as Eletrobras, notice of the plan and said publicly that it would bring the proposal to President Michel Temer’s special council on privatizations.
While both the privatization model and terms are yet to be decided, the government will keep a right to veto some strategic decisions, the ministry said in a statement.
American depositary receipts of Eletrobras EBR.N surged 20 percent on the news, hitting $5.34 in after-market trading. Earlier, the ADRs closed at $4.45 on Monday in New York.
Temer has worked to attract private investment to Brazil’s energy and transportation infrastructure, but giving up control of a state-run company would mark a sharp contrast with other politicians’ wariness about unpopular privatizations.
A successful sale of the government’s Eletrobras stake would help Temer hit a recently widened budget target and avert a another debt rating downgrade after Brazil’s worst recession on record.
The government sees its stake in Eletrobras as worth at least 12 billion reais ($3.8 billion), a government source said.
Source: Reuters.com