Despite a Supreme Court injunction, the government is maintaining the auction of Eletrobras' distribution companies.

Reuters - An auction scheduled for July 26 by the government for the privatization of six Eletrobras energy distribution companies should not be affected by an injunction from Minister Ricardo Lewandowski of the Supreme Federal Court (STF), who ruled last week that the sale of public companies depends on approval by Congress.

The current interpretation within the Ministry of Mines and Energy is that the bidding process can proceed, except for the potential sale of the distributor serving the state of Alagoas, Ceal, which was the subject of a separate injunction also signed by Minister Lewandowski, the executive secretary of the Ministry of Mines and Energy, Marcio Félix, told Reuters on Monday.

"There are different interpretations (regarding the injunction), and there are interpretations that it doesn't affect anything. That's our understanding, except for Ceal, which has a specific injunction... But the auction is scheduled, in principle, we're going to work towards that," he said.

On Friday, the Minister of Mines and Energy, Moreira Franco, told reporters that he believed the Supreme Court's injunction against privatizations could impact the sale of Eletrobras' distribution companies and that the government would seek to overturn the decision.

Félix's statement, however, shows that this interpretation is already outdated within the department.

Federal prosecutor and legal advisor to the Ministry of Mines and Energy, Renata Beckert Isfer, wrote on her LinkedIn page that Lewandowski's decision does not affect the auction of the distributors by requiring prior legal authorization for the sale of state-owned companies.

"The auction of the distribution companies is provided for in Law 12.783/2013. Moreover, all distribution companies are covered by specific legislation, which wouldn't even be necessary given the decision," he stated.

Eletrobras stated in a market announcement Thursday night that it is still evaluating the potential impact of the Supreme Court's decision on the sale of its distribution companies. The state-owned company added, however, that it will "take all necessary measures" to proceed with the Ceal auction.

CONGRESS
The success of the sale of Eletrobras' distribution companies also depends on Congressional approval of a bill with legislative changes that address the debts of these companies with funds in the electricity sector, which is seen as essential to attract investors to the auction, especially those operating in the North.

Eletrobras has called a shareholders' meeting for July 30th to discuss the future of its distribution companies, and the agenda includes a proposal for the liquidation and dissolution of these companies if the company is unsuccessful in selling them.

"We are working to prevent what nobody wants from happening, which is the liquidation of companies. So we will explore all possible solutions to this," reinforced Secretary Félix.

He further added that the timeframe is short to make the privatization of Eletrobras' distribution companies viable, since this month there will also be a recess in the National Congress and the approval of projects should become more difficult due to the approach of the presidential elections in October.

"This year's calendar gives us two months to approve these things, and that's being optimistic," the secretary stated, highlighting that the government will also prioritize in the coming days the approval of a bill aimed at allowing an agreement between the Union and Petrobras for the revision of the so-called "onerous transfer" contract signed by the company in 2010.

"It's getting closer, we only need three more highlights," he said.

The Chamber of Deputies approved the main text of the bill on the onerous transfer on June 20, but the discussion of amendments was postponed. The matter will still need approval by the Senate and presidential sanction.