Pinheiro Neto Advogados is acting as counsel to International Finance Corporation (IFC) for the 2.8 billion reais (US$840 million) privatisation of Goiás state utilities provider Celg Distribuição (Celg-D), as Brazil's cash-strapped government seeks to shore up the public purse in one of the largest privatisations in over a decade.
Pinheiro Neto is working with IFC, which is advising Celg-D's controller, state-owned power company Eletrobras, and national development bank BNDES, which is overseeing the privatisation process. IFC turned to Pinheiro Neto for due diligence of the utilities company, the structuring of the contractual documents, and the drafting of the tender.
Following the publication of Celg-D's tender notice on 24 June, companies and consortia have until 16 August to submit bids for the company with a minimum value of 2.8 billion reais. Brazil's electricity and antitrust agencies will then examine the proposals on 19 August, announcing a winner by 10 October.
The Rousseff administration kick-started the privatisation of Celg-D last year in a bid to raise funds. João Marcelo Pacheco, who led the team at Pinheiro Neto, says there has not been a privatisation of this size in Brazil for over a decade. "This definitely made it more challenging, because most of the individuals at the institutions we were dealing with have not worked on privatisations before," he notes.
The privatisation is also unusual because it involves the sale of assets owned jointly by the federal government and the state of Goiás, which is located in Brazil's interior. Eletrobras, a federal entity, currently holds a 51 per cent stake in Celg-D, while Goiás state holding company CELGPAR controls the remainder. Pacheco says this called for the careful division of assets and extensive drafting.
The privatisation is controversial. Workers at Eletrobras ended a three-day strike yesterday over plans by the Temer administration to privatise the company's other subsidiaries. The government says the sales are necessary to pay down public debt, which stands at 67 per cent of Brazil's GDP. "Our government is highly indebted and all these state companies don't have the resources to improve productivity," explains Pacheco. However, many public sector workers are concerned about wage cuts, job losses and private sector profiteering.
Which companies the government auctions off remains to be seen. The Temer administration wants to privatise state-owned assets worth between 20 billion reais (US$ 6.2 billion) and 30 billion reais (US$ 9.2 billion) by 2017. Pacheco believes there are at least five or six energy distribution companies ripe for private ownership. "We know for a fact that Eletrobras owns numerous other companies it can sell," he says.
Counsel to the International Finance Corporation
Pinheiro Neto Advogados - Partner João Marcelo Pacheco, Caio Ferreira Silva and Ricardo Pagliari Levy, counsel Adriano Trindade, and associates Roberto Lambauer, Renato Grecco, Heloísa Ferraz, José Roberto Oliva Júnior and Carolina Dantas de Melo
Counsel to Eletrobras and BNDES
In-house counsel – Tarcila Reis