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Brazil eyes privatisation of Eletrobras

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BRASILIA: Brazil’s government is eyeing the privatisation of giant power utility Eletrobras in a bid to balance a yawning budget deficit, the energy ministry said, sparking a surge in share prices on Tuesday.


“This is a move of fundamental importance for developing the Brazilian electricity sector,” Mining and Energy Minister Fernando Coelho Filho told a press conference in Brasilia.


The energy ministry said in a statement issued after markets closed on Monday that the sell-off would “add competitiveness and efficiency to the businesses in the management of its operations, without the stumbling blocks facing public companies.”


The government, which is struggling to pay the bills following two years of deep recession, hopes to raise 20 billion reais ($6.3 billion) in the partial sell-off of the country’s biggest power utility.


The government would retain a golden share to exercise veto power.


It also said it would exclude nuclear power plants from the sale, as well as the Itaipu hydroelectric station which is joint-owned with neighbouring Paraguay.


Currently the government holds 40.98 per cent of Eletrobras’ capital, while state development bank BNDES holds another 18.72 per cent.


Common share prices rocketed on the announcement on Tuesday, closing 48.9 per cent higher, and preferred shares rose 32.6 per cent.


The surge helped push the Sao Paulo market’s Ibovespa index above the 70,000 barrier.


Last week, the government conceded that it would not meet its budget targets and raised the expected budget deficit ceiling to $50 billion in 2017, up from $44 billion.


Scandal-plagued President Michel Temer is pushing through market reforms that he hopes will loosen up Brazil’s notoriously inefficient economy and restore growth.— AFP


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