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Electricity Whispers | Turning Point for ELET5?

FIESP supports government as electrical utilities increase political pressure
Zé Dirceu
Translation: C. Brayton

Both FIESP — the Industrial Federation of São Paulo State — and the federal government are calming markets with a sober and positive message about a Provisional Measure (MP) that will set rates for the electrical sector and reduce the cost of energy — for residential users, by 16% and for industrial customers, by up to 28%.

Some concession-holders have been campaigning hard against this measure.

It would interesting to try to poll industry subsectors according to their corporate constitution: state-owned, partially state-owned, public-private partnerships, and private sector generators, transmitters and distributors. And, of course, foreign and national players.

This conflict of interests has caused Eletrobras stock to fall. The market analysts behind the campaign against the MP are quick to argue that the company’s future is endangered by the legislation.

Yesterday, however,the president of  the governmental agency Empresa de Pesquisa Energética (EPE), Maurício Tolmasquim, explained the situation.

Tolmasquim said the fluctuation in stock prices is a routine market phenomenon. “Markets rise and fall. Eletrobras’s time to rise will come soon enough. This is normal. No one will allow it to fail. It is too strategic to Brazil.”

“The government will not let Eletrobrás perish. We consider it a highly important company. … ,” he said.

That is to say, alarm over the stock price makes no sense. Yesterday, the government announced it would implement the measure without delay, leaving no room for postponements.

Also worthy of note was the whole-page advertisement placed by Fiesp in major Brazilian dailies, supporting the MP of the electrical sector. The ad points out correctly that concessionaires continue to account improperly for the amortization of their investments in the construction of new hyrdroelectrical generators. “That is to say, we continue to foot the bill for the construction of these plants, which were paid off decades ago,”the Fiesp note said.

“President Dilma did her part: she listened to FIESP’s arguments and drafted  MP 579, which will provide Brazilians with an average savings of 20.2% on their electric bill starting in 2013. The measure will return R$24 billion to the pockets of the Brazilian consumer — more than the Bolsa Familia social subsidy,” the ad goes on to say.

Fiesp also says it finds the effort to defeat the measure surprising. MP 579 must still be voted on by the Congress before becoming law. And believe us: deputies are senators are being heavily lobbied to defeat it.

Communication to the Market

Bovespa: An article published in Brasil Economico on  21/11/2012 reports, among other things, that  Eletrobras is officially expecting to report EBITDA close to zero in 2013

We seek clarification about this report as well as any other facts considered important.
A empresa enviou o seguinte:

In response to GAE 4.815-12,  21 November 2012, with respect to an article published by Brasil Economico on 21 November 2012, we clarify to shareholders and the market in general, as illustrated in our Explanatory Notes to our 3Q12 ITR and published in our report to investors, under “Item 9. Subsequent Eventrs (Note 45 of the ITR — Deferment of Public Sector Electrical Concessions”) that we have suffered a substantial reduction in revenues from our generation and transmission operations.

We are working to identify and measure other factors that could influence the Company’s bottom line and results, and we are currently studying ways to resize and adapt operations to our current cost structure such that Eletrobras can efficiently reestablish operations and maintenance of the assets effected by this situation.

In this scenario, it is not possible to say with certainty what will be the new level of operational income and EBITDA for next year, except to say, as we did at our conference call earlier this month, that these numbers will be substantially reduced.

E importante ressaltar, entretanto, que dada a relevancia da materia, a mesma  sera deliberada pela Assembleia de acionistas da Eletrobras, convocada para o  dia 03 de dezembro de 2012, nao havendo, ainda, como se antecipar qual sera a decisao a ser tomada pelos socios quanto a materia em debate.

Oportunamente informaremos o resultado desta avaliacao bem como as acoes que serao adotadas.

Must-read on the subject: Exame magazine.