The news that Brazil’s government is to sell a controlling stake in the country’s largest power generator has seen a sharp rise in share price, but also some confusion as to the implications of the sale.
Shares in Centrais Elétricas Brasileiras, or Eletrobras, soared more than 46 per cent on Tuesday after the government signalled its decision.
“This measure will bring greater competitiveness and agility to the company in the management of its operations, without the bonds imposed by being a state-controlled enterprise,” the ministry of mines and energy said in a statement.
Despite the announcement, it remains to be seen how the deal will unfold in actual terms. Brazil’s constitution forbids the country’s nuclear power plants falling into private hands.
In addition the Itaipu hydroelectric power plant, which Brazil runs in partnership with Paraguay, would have to be stripped out of the deal.
Fernando Coelho Filho, state minister of mines and energy said the sale of the stake in Eletrobras could raise up to $20bn. Eletrobras had a market capitalisation of nearly $25bn on Tuesday. The government holds 51 per cent of the voting shares and 41 per cent of total shares of Eletrobras. It would be expected to retain a golden share if the deal goes through, allowing it to veto actions such as the company falling into foreign control, analysts said.