January 19, 2018 / 11:02 PM / a month ago

UPDATE 1-Brazil releases draft bill for Eletrobras privatization

(Adds details of bill, share move, context)

BRASÍLIA/SAO PAULO, Jan 19 (Reuters) - Brazil’s government made public on Friday the text of the draft bill proposing to privatize the country’s largest power conglomerate, Eletrobras, and said it will send the bill to Congress next week.

The draft bill says the privatization of Eletrobras, or Centrais Elétricas Brasileiras SA, will be made through a capital increase. The operation could include a secondary offer of government shares.

The bill says the government will have a golden share and that any future private shareholder will have a voting right limited to 10 percent, regardless of the amount of shares it held in the company after the privatization.

The sale of Eletrobras will likely be Brazil’s largest privatization since mining giant Vale SA was sold by the government 20 years ago. Eletrobras is Brazil’s largest power company, holding dozens of subsidiaries with operations in power generation, transmission and distribution.

News late on Friday that the government was finally sending the bill to Congress boosted Eletrobras shares, which gained almost 3 percent in Sao Paulo to trade at 20.70 reais ($6.48).

Most of the guidelines included in the draft bill were already known, since government officials and Eletrobras executives have been discussing the possible model for the privatization for months.

One important aspect is that the bill confirmed the government’s intention to renew concessions of power generation projects currently held by Eletrobras for another 30 years, likely boosting investors’ interest in the operation since they will be assured of future revenues.

It also confirmed that the government will keep control of two Eletrobras subsidiaries: Eletronuclear, which manages the country’s two nuclear reactors, and the Itaipu hydropower plant, a joint venture with Paraguay’s government.

There will likely be a long process of evaluation in Congress and the bill could go through a number of changes.

$1 = 3.1961 reais Reporting by Lisandra Paraguassu, Leonardo Goy and Marcelo Teixeira; Editing by Chizu Nomiyama and Daniel Wallis

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