November 7, 2017 / 5:03 PM / in 7 months

UPDATE 1-Brazil drafting bills changing electric sector rules -official

By Luciano Costa

SAO PAULO, Nov 7 (Reuters) - Brazil’s energy ministry will soon send to President Michel Temer three bills that will outline the privatization of Centrais Elétricas Brasileiras SA and overhaul electricity sector rules, an official told Reuters on Tuesday.

The draft of the bills will be shown to Temer within the next 10 days and then be sent to Congress for approval, Deputy Energy Minister Paulo Pedrosa said.

The first of the proposals, which concerns the sale of distributors owned by Eletrobras, as the company is known, may be submitted to President Temer as early as today, Pedrosa said. That bill will also contain provisions to mitigate hydrological risks, such as prolonged droughts.

The second bill will define the model for the privatization of Eletrobras, and the third will propose a new regulatory framework for the electricity industry, he said.

According to Pedrosa, the government plans to offer compensation to Eletrobras in exchange for proposed changes in its hydropower contracts.

The proposed legislation calls for Eletrobras to assume billions of reais of debt owed by its six distribution companies in exchange for a 30 percent stake in them after they are sold, Pedrosa added.

The sale of the distributors is expected to take place by April 2018 before the privatization of Eletrobras, which the government plans to carry out by mid-year.

Eletrobras will issue new shares in the second half of 2018 as part of the plan to dilute the government’s stake and privatize the company.

Wilson Ferreira Jr, Eletrobras chief executive, said on Monday the company will be privatized after passage of the relevant legislation through Congress. He added that the government would continue to hold a “golden share,” which would give the state strong veto power in certain strategic areas. (Reporting by Luciano Costa; Writing by Ana Mano; Editing by Steve Orlofsky)

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