Amended Eletrobras privatization bill not worth enacting, says author

BRASILIA, May 25 (Reuters) - A bill to privatize Latin America’s largest utility, Centrais Eletricas Brasileiras SA , has advanced to Brazil’s Senate, but its original sponsor says amendments have disfigured the legislation, threatening to boost pollution and power rates.

Changes made in the lower house would oblige the government to back construction of 6 gigawatts (GW) in new natural gas-fired power plants, as well as favoring new mini-hydroelectric power plants.

For Paulo Pedrosa, who wrote the original bill in 2016 to privatize Eletrobras, as the utility is known, that would defeat the purpose of modernizing the electricity sector and to make it more competitive and affordable.

“In its present shape, this bill is not worth enacting. It will be too costly,” said Pedrosa, a former deputy minister of mines and energy, in an interview with Reuters.

“The costs will exceed the benefits. Brazilian society will have to pay more than the value of the company,” said Pedrosa, who heads the lobby of large industrial power consumers ABRACE.

The bill presented by President Jair Bolsonaro aims to privatize Eletrobras by floating 60% of its shares on the stock market, up from 40% at present, forfeiting state control. The federal government would retain a golden share to veto hostile takeovers and other strategic threats.

The government hopes to raise 50 billion reais ($9.4 billion) from the sale of shares, of which half will go to the Treasury and the other half to mitigating household energy costs in coming years.

The Mines and Energy Ministry said in a statement on Friday that it still supports the bill, which will increase investments by Eletrobras. The ministry denied that recent amendments would increase electricity rates for consumers.

The government has accepted the amendments to pass the bill, which would be a major advance for its privatization agenda.

The concessions were made to the center-right bloc of lawmakers controlling congressional leadership, whose constituencies stand to gain from the required investments.

If the Senate changes the bill, it would have to return to the lower house. The legislation, which was presented by the government as a temporary decree, will expire if not passed by June 22. ($1 = 5.3270 reais) (Reporting by Anthony Boadle in Brasilia and Luciano Costa in Sao Paulo Editing by Marguerita Choy)