ELETROBRAS – Centrais Elétricas Brasileiras S.A.

closed

The first acts carried out towards the privatization of Centrais Elétricas Brasileiras S.A – Eletrobras date back to the 1990s. The PND – originally created by Provisional Measure (MPV) No. 155, of March 15, 1990, later converted into Law No. 8,031, of April 12, 1990, but today regulated by Law No. 9,491, of September 9, 1997 – One of its main objectives is to reorder the strategic position of the State in the economy, transferring activities unduly exploited by the public sector to the private sector (art. 1, item I, of Laws no. 8,031, of 1995, and 9,491, of 1997) . Through the PND, companies controlled by the Union and established by law or act of the Executive Branch can be privatized (art. 2, item I, of Laws no. 8,031, of 1995, and 9,491, of 1997). The first actions for the privatization of Eletrobras began with the inclusion of the company in the PND by Decree No. 1,481, of May 3, 1995, later replaced by Decree No. 1,503, of May 25, 1995. From then on, the privatization of some of Eletrobras' subsidiaries was promoted, significantly expanding the private sector's participation in the Brazilian electricity sector. However, when considering MPV nº 144, of December 11, 2003, which deals with the commercialization of electrical energy, the National Congress decided to expressly exclude Eletrobras and its subsidiaries from the PND, as established in art. 31, §1º, of Law 10,848, of March 15, 2004 (“§ 1º The company Centrais Elétricas Brasileiras S/A – ELETROBRÁS and its subsidiaries are excluded from the National Privatization Program – PND: Furnas Centrais Elétricas S/A, Companhia Hidro Elétrica do São Francisco – CHESF, Centrais Elétricas do Norte do Brasil S/A – ELETRONORTE and Empresa Transmissora de Energia Elétrica do Sul do Brasil S/A – ELETROSUL and Companhia de Geração Térmica de Energia Elétrica – CGTEE.”). The theme was revived 10 years later. Law No. 13,334, of September 13, 2016, resulting from the conversion of MPV No. 727, of May 12, 2016, created the Investment Partnership Program of the Presidency of the Republic (PPI) and established that its Council (CPPI) would begin to exercise the functions of the National Privatization Council (CND). Thus, the second movement towards the privatization of Eletrobras began with the issuance of Resolution CPPI nº 13, of August 23, 2017, recommending to the President of the Republic the qualification of Eletrobras in the Investment Partnership Program – PPI and, in the exercise of CND functions, their inclusion in the PND. On December 28, 2017, MPV nº 814 was published, which provided, in its art. 3, the revocation of §1 of art. 31 of Law 10,848/2004, in order to enable the inclusion of Eletrobras and its subsidiaries in the PND. Less than a month later, on January 22, 2018, the Executive Branch submitted Bill (PL) No. 9,463/2018 to the National Congress, providing for the privatization of Eletrobras via an increase in share capital. Still during the validity of the aforementioned provisional measure, Decree No. 9,351, of April 19, 2018, accepting the CPPI recommendation, once again included Eletrobras in the PND and qualified it in the PPI. Subsequently, the aforementioned decree was amended by Decree No. 9,375, of May 15, 2018, solely to define the responsibilities of the National Bank for Economic and Social Development (BNDES) and Eletrobras in the privatization process. However, the loss of effectiveness of MPV nº 814, of 2017, on June 1, 2018, reestablished the effects of § 1 of art. 31 of Law No. 10,848, of 2004, and, consequently, kept Eletrobras excluded from the PND (according to Declaratory Act No. 30, of June 5, 2018, of the President of the National Congress). Subsequently, a new attempt to privatize Eletrobras occurred through PL nº 5,877/, of November 5, 2019, which, like the previous bill, also proposed the privatization of Eletrobras in the form of an increase in share capital, through public subscription of common shares. In view of the lack of momentum in the processing of PL nº 5,877/2019 and the progressive loss of market and deterioration in the value of Eletrobras, the Executive Branch forwarded MPV nº 1,031, of February 22, 2021, to the National Congress, initiating the final process of privatization of the company. This provisional measure (a) established the revocation of §1 of art. 31 of Law No. 10,848/2004 (art. 17, item II), (b) authorized the BNDES to “hire the specialized technical services necessary for the Eletrobras privatization process” (art. 1, §4) and (c) submitted the capitalization of the state company to, among other conditions, conversion into law of the provisional measure itself (art. 16). Based on MPV nº 1,031/2021, the CPPI, through CPPI Resolution nº 167, of March 16, 2021, once again recommended to the President of the Republic the inclusion in the PND and qualification in the PPI of Eletrobras, “for the purpose of starting studies necessary to structure the capitalization process, observing the guidelines established in MPV nº 1,031/2021” (CPPI Resolution nº 167, of March 16, 2021). The recommendation was accepted by Decree No. 10,670, of April 8, 2021. On July 12, 2021, MPV nº 1,031/2021 was converted into Law nº 14,182, guaranteeing the necessary legal basis to continue the Eletrobras privatization process, following the PND procedure. From then on, the following actions necessary for the public offering of shares were taken: Publication of CPPI Resolution No. 203, of October 19, 2021, which deals with modeling the privatization of Eletrobras. The decision was based on specialized technical studies contracted by BNDES. Public hearing will be held on January 5, 2022. Holding of the 181st Extraordinary General Meeting of Shareholders of Eletrobras (AGE), on February 22, 2022, which decided on the capitalization of the company, with approval of the 12 items on the agenda and effectiveness conditioned on the privatization of the company. Approval, by majority, of the privatization process by the Federal Audit Court (TCU), on May 18, 2022. Submission to the Securities and Exchange Commission (CVM), on May 27, 2022, of the request for automatic registration of the Public Offering of primary distribution of common shares issued by the company. Finally, on June 9, 2022, the pricing process was completed, with the submission to the Securities and Exchange Commission (CVM) of a relevant fact regarding the pricing of the public offering for the distribution of shares, at which time market demand was assessed and set the price at R$42.00 per share. The share offering took place with broad participation from national and international investors, individuals and legal entities, as can be seen in the table provided by Eletrobras in the Public Offering Closing Announcement (available at: https://ri.eletrobras.com/oferta -public/): The Eletrobrás privatization process was completed on 7/5/2022, according to information released to the market by the company (available at: https://ri.eletrobras.com/oferta-publica/).