Lula’s pragmatism drives power utility privatization
The Lula administration’s decision to charge R$3.71 billion from Copel to renew the concession of three hydroelectric plants is seen by political analysts, power industry experts, financial market players, and high-ranking sources in the company as a sign that the government will not interfere in the privatization of the Paraná-based power utility.The market was concerned that possible government interference could drive away investors. President Luiz Inácio Lula da Silva has repeatedly criticized the privatization of Eletrobras - Brazil’s largest power utility -, which the Paraná government has presented as a model to sell its controlling stake in Copel.Despite Mr. Lula’s stance, governors Tarcísio de Freitas (São Paulo), Romeu Zema (Minas Gerais), Eduardo Leite (Rio Grande do Sul), and Ratinho Júnior (Paraná) are trying to sell state-owned companies such as Sabesp (water), Cemig (power), Corsan (water), and Copel, but are facing resistance. In Paraná, the electoral stronghold of Gleisi Hoffmann - the head of Mr. Lula’s Workers’ Party (PT) and a leading voice in the government - there is talk of an effort to prevent the sale of Copel.Leandro Gabiati, director of the political consulting firm Dominium, sees divergences between the Lula administration’s political discourse and real-world policymaking. "The federal government has an open dialog with the governors. Direct criticism could damage relations and repeat the mistakes of the previous administration," he said.A source from the company’s top management, speaking on condition of anonymity, confirmed that the value is within the range of what Copel thought it would have to pay for the assets. He believes that the criticism of the Eletrobras model has been greatly exacerbated by the legislative analysis and the insertion of riders - an additional provision added by lawmakers to a bill that has little to do with the subject matter - but that the landscape seems favorable for Copel."The signing of this ordinance shows the pragmatism and maturity of the government, that technical issues and legal certainty will prevail," the source said. "And this is also true for other issues in the power industry, such as the renewal of distributors."Governor Ratinho Júnior, re-elected with nearly 70% of the vote, easily won approval from the state’s lawmakers, but there are still some steps ahead. One was the renewal of the concession, which is likely to add value to the privatization by giving the...
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