Top executives quit Brazil's Petrobras, Eletrobras as privatisation doubts grow

[RIO DE JANEIRO] Two of Brazil's top executives overseeing privatisation efforts at state-run oil and electricity companies Petrobras and Eletrobras stepped down on Monday, raising questions about the future of President Jair Bolsonaro's asset sale program.

Wilson Ferreira Jr, the chief executive of state-run power firm Centrais Eletricas Brasileiras, or Eletrobras, resigned, saying he had lost faith that there was the necessary political support for the privatisation drive.

Mr Ferreira, who led Eletrobras for nearly four-and-a-half years, will take the helm of recently-privatized fuel distributor, Petrobras Distribuidora SA, which operates Latin America's largest gas station chain known as BR Distribuidora, the two companies said.

Later on Monday, Anelise Lara, Petroleo Brasileiro SA's refining unit chief, also announced plans to retire, two people familiar with the decision said.

The departure of Ms Lara, who was leading the company's efforts to privatise half of Brazil's fuel production capacity, is not expected to disrupt Petrobras' first refinery sale of its RLAM plant in Bahia state, due before March, the sources said.

Petrobras did not immediately respond to a request for comment.

Mr Ferreira was appointed Eletrobras CEO in 2017 by then-President Michel Temer with a mission to privatise the company.

He told analysts and journalists on conference calls on Monday that although his effort enjoyed the full backing of the Economy and Mines and Energy ministries, he was not sure that Brazil's Congress would sign off.

"If I can't see a clear chance for this process to happen, my contribution to the company is compromised," said Mr Ferreira, who will leave his post on March 5.

The government has said the Eletrobras sale could generate up to 20 billion reais (S$4.91 billion).

Eletrobras' US-traded stock closed down 11.8 per cent.

Brazil's benchmark Bovespa index was closed on Monday for a Sao Paulo holiday.

NEGATIVE FOR ELETROBRAS

At BR Distribuidora, Mr Ferreira will replace Rafael Salvador Grisolia, who is due to step down on Jan 31. Mr Grisolia won praise from investors for successfully conducting the company's privatisation.

Mr Ferreira, regarded as a more experienced executive to lead the company as a private entity, was chosen by the board, which is packed with former executives from international oil companies.

Analysts saw the changes as negative for Eletrobras and positive for BR Distribuidora.

"Mr Ferreira brings more than 30 years' experience in the power utilities sector, which might complement the path to BR Distribuidora's future," UBS analyst Luiz Carvalho said in a note to clients. "We expect a positive reaction." Mr Ferreira's resignation comes only a month after Eletrobras Chairman José Guimarães Monforte announced he was resigning, citing personal reasons but raising doubts in the market about the reason for his decision.

Earlier this month, shares of Brazil state-run bank Banco do Brasil also fell on threats its CEO could be ousted after cutting down its workforce.

The high-profile departures led some analysts to question whether Mr Bolsonaro's government remains committed to keeping state-run companies free of political interference, a promise that helped him get elected in 2018. It also raised doubts about its commitment to sell off billions of dollars worth of assets at fair prices.

Political interference by past administrations in both Petrobras and Eletrobras led the companies to register multibillion dollar writedowns for bad investment decisions and corruption, leading to Brazil's largest graft investigation ever, known as Carwash.

Mr Bolsonaro won office with a pledge to kick-start Brazil's economy but the coronavirus pandemic has derailed growth and is draining his popularity after generous state handouts to fight poverty expired at the end of last year.

Eletrobras had suffered political interference that was harmful for the company and for the entire sector, UBS' Mr Carvalho said.

"(The) next CEO nomination could also potentially indicate the political appetite for future privatisations in Brazil," he said in the note to clients.

REUTERS