Eletrobras is denounced at the SEC for omitting billionaire risk from shareholders
- May 18, 2022
- No Comment
State-owned company is accused of delaying information on the financial situation of the Santo Antônio plant; company did not manifest
Entities of Eletrobras servers presented this Tuesday (17) to the SEC (the regulatory body of the US capital market) a complaint against the company. According to the document, Eletrobras omits from its shareholders the dimension of the financial risks it suffers from the Santo Antônio hydroelectric plant.
The plant, which is facing difficulties in paying a sentence, has Furnas, a subsidiary of the state-owned company, among its shareholders, with a 43.06% stake.
Eletrobras is listed on the American market: it has receipt deposits, the ADRs (American Depositary Receipt) traded on the New York Stock Exchange. Therefore, it is subject to monitoring by local regulatory bodies. The state-owned company did not comment on the complaint until Tuesday morning.
Three civil servants from the state-owned company, AEEL (Association of Eletrobras Employees), ASEF (Association of Furnas Employees) and CNE (National Collective of Electricians) subscribe to the complaint to the SEC.
In their opinion, Eletrobras delays the disclosure of sensitive financial details about Santo Antônio in an attempt to speed up the timetable for its privatization, even if this imposes losses on the company and its shareholders.
The Santo Antônio plant is one of the largest in Brazil. It is installed on the Madeira River, near Porto Velho (RO). The hydroelectric plant is controlled by Madeira Energia, whose partners, in addition to Furnas, are Andrade Gutierrez, Odebrecht, FIP Caixa Amazônia Energia and Cemig.
The document sent to the SEC details that Madeira Energia faces a billion-dollar defeat in an international arbitration chamber, moved by builders and equipment suppliers for the plant’s work. The sentence against Madeira Energia has already been handed down, but the application was postponed after a request for additional clarifications.
According to the text filed with the SEC, to which Folha had access, the arbitration decided that Madeira Energia will have to pay approximately US$ 300 million (R$ 1.5 billion).
The complaint highlights that, in a notice to the market on March 18, 2022, Eletrobras expressed its concern with arbitration. However, in the balance sheet presented to Eletrobras’ ordinary general meeting, held more than a month later, on April 22, it did not disclose the total amount, despite already having knowledge of it.
According to the complaint, Eletrobras preferred to present that the provision for the debt was around R$ 706 million, or US$ 141 million, underestimating the losses with arbitration by around 50%, and the risk of total default by Madeira Energia. .
“The billion-dollar debt that Furnas can carry and, therefore, Eletrobras, were already known by the controller of Eletrobras, but surprisingly, no disclosure was made to any of the shareholders”, states the complaint filed with the SEC.
The intention to carry out the capital increase operation was evaluated and approved on April 29, and communicated to the market by Santo Antonio and Eletrobras.
According to the SEC complaint, Eletrobras still omits other information from shareholders.
The text states that the other partners of the plant, Andrade Gutierrez, Odebrecht and FIP Caixa Amazônia Energia have already declared that they will not be part of the capital increase, without this information having been disclosed. Cemig has made it official that it will not participate in a notice to the market.
As shareholders, the entities AEEL and ASEF, emphasize that Eletrobras has not yet informed what amount Furnas would be responsible for in this operation, nor did it deal with the risk scenarios with or without participation of its subsidiary in the operation.
They claim that, without investment, the company can go bankrupt, but with a full contribution from Furnas, it becomes state-owned, causing the subsidiary and, consequently, Eletrobras to absorb a debt of R$ 18 billion.
The complaint at the SEC also questions the procedures adopted for the disclosure of balance sheets.
According to the complaint, Madeira Energia’s board approved the company’s balance sheet on February 8, the day before declaring its loss to the market and without recording the true value of this huge loss in its books.
“We were informed that Deloitte, the independent auditing firm responsible for auditing MESA’s balance sheet [Madeira Energia]had strongly recommended that the company republish its results, including the full amount defined by the aforementioned arbitration”, highlights the text of the complaint.
In turn, Eletrobras’ balance sheet, says the complaint, was approved before Furnas’ balance sheet.
While Eletrobras holding’s board of directors approved the 2021 annual balance sheet on March 18, 2022, Furnas’ balance sheet was approved by its board on March 21, 2022, three days later.
“There is evidence that Furnas’ board of directors approved the company’s annual balance sheet without considering any written document provided by the internal audit or the independent auditors. [Deloitte]. It is important to say that the approval was not unanimous, with at least one councilor voting against”, states the complaint.
In the meantime, the president of Furnas was changed. Lawyer Clóvis Torres, who was leading the privatization process at the subsidiary, was replaced on April 9. In his place, Caio Pompeu, financial director of Furnas, took over.
In the opinion of the whistleblowers, so much lack of transparency borders on fraud.
In view of this, the entities request the SEC to investigate Eletrobras’ board of directors for misconduct in the presentation of information provided during the annual general meeting, which approved the company’s annual balance sheet.
The complaint against Eletrobras was inspired by the SEC’s decision to question Vale for not having informed shareholders about the problems and operational risks of the Córrego do Feijão mine, which led to the Brumadinho tragedy.
The divergences occur at the same time that the state-owned company enters the final stretch to be sold. This Wednesday (18), the privatization of Eletrobras returns to the agenda for judgment at the TCU (Union Court of Auditors).
Once this phase is over, it will be necessary to comply with the protocols in the capital market to take the offer on stock exchanges, in Brazil and in the United States. According to investment banks, it is not recommended to carry out the operation in the second half of the year.