Monocratic order complies with the court decision that gave the agency until this Monday to approve the transfer of the distributor to Âmbar
The general director of Aneel (National Electric Energy Agency), Sandoval Feitosa, approved this Monday (7.Oct.2024) the transfer of Amazon Energycontrolled by Oliveira Energiafor the Ambergroup company J&F. The order should be published in the next few hours in an extra edition of the DOU (Official Gazette of the Union).
Sandoval’s decision was monocratic. The agency states that approval of the transfer, sub judice, was taken “in strict compliance with court decision”. The Amazonas Court had given a deadline of this Monday for Aneel to validate the transfer under the terms proposed by Amazonas and J&F, albeit in a monocratic way by the general director.
The plan approved by Aneel, in compliance with the court decision, will cost approximately R$14 billion over the next 15 years with flexibility that will be covered by the CCC (Fuel Consumption Account), a charge charged to the electricity bill. It also includes a capital contribution of R$6.5 billion to reduce Amazonas Energia’s debt.
Last Thursday (Oct 3), the 1st Federal Court of Amazonas issued a decision that was seen as confusing by Aneel, without a clear determination. The agency filed an embargo for declaration, but in a new court order issued this Monday it was clarified that there is an obligation to approve the transfer. Here’s the complete of the new order (PDF – 175 kB).
According to the court decision, Aneel should immediately approve the corporate control transfer plan as presented on June 28, the vote for which had ended in a 2-2 tie by the board. It was determined that Sandoval give “immediate compliance with the decision in the terms above, in a monocratic manner, signing the relevant instruments”.
The approval of the transfer by monocratic decision, that is, without approval from the rest of the board, is unusual at Aneel. In a note, the agency says that approval of the “It is naturally precarious and will only last as long as the court decision is in force”which the agency still appeals, claiming that it alone has the authority to authorize or not such a transfer. Here’s the complete from the Aneel note (PDF – 160 kB).
Despite the monocratic decision, Aneel maintained the call for an extraordinary board meeting for Tuesday (Oct 8) for a final vote on the Amazonas Energia case. It will evaluate J&F’s appeal and its most recent proposal. The idea is to facilitate a more stable and legally secure solution, which is not anchored in a court injunction.
In a note, Âmbar stated that regardless of any court decision, the approved plan “avoids the repetition of the mistakes that led the distributor to the current serious scenario”. He also said that approval “creates the necessary conditions for the effective recovery of Amazonas Energia” and has the “bases for providing energy security to the State”.
Read the full note from the J&F group company:
“Aneel’s approval of the control transfer plan presented by Âmbar creates the necessary conditions for the effective recovery of Amazonas Energia, guaranteeing the best solution for the population of Amazonas, energy consumers across the country and the Union.
The approved plan provides the basis for providing energy security to the state and solving decades of economic unsustainability. In 20 years, Amazonas Energia lost more than R$30 billion. Regardless of any court decision, the plan approved this Monday (8) avoids the repetition of the errors that led the distributor to the current serious scenario.
In addition to avoiding costs of up to R$20 billion that Brazilian taxpayers would have to bear if the transfer of control did not occur, the approval of the plan provides for the sharing of efficiency gains with the consumer and a capital contribution exceeding R$ $6.5 billion in 2024, enough to balance Amazonas Energia’s debt situation.
Âmbar is now focused on the management transition of Amazonas Energia, with total priority for the quality of services to consumers, the state’s energy security and the company’s economic and financial rebalancing”.
Understand the Amazonas Energia imbroglio
Amazonas Energia is the distribution concessionaire in the Northern State. Since before its sale, in 2018, the Eletrobras for Oliveira Energia, it already had a high level of debt and default on sectoral obligations. In November 2023, Aneel recommended to the government the extinction (expiry) of the concession.
Amazonas Energia’s unsustainable situation has lasted for decades, accumulating losses of more than R$30 billion in 20 years. Only with the Eletrobras Eletronorte thermal plants that they supplied to the distributor – and which were also sold to the J&F group–, the debt exceeds R$10 billion.
In addition to the distributor’s long-standing problems, Amazonas faces a serious problem with energy theft. As shown by the Power360the rate of non-technical losses, the so-called “cats”, exceeds the supply volume for the entire low voltage market in the State.
When it was privatized in 2018, the government gave Amazonas’ new management 5 years to get the concession up and running. During this period, the main regulatory targets required of the distributor were made more flexible, avoiding penalties and guaranteeing the operation. However, the deadline ended in May this year and the situation, instead of improving, got worse.
The transfer of control, at a symbolic price and with more flexible rules, was the most viable alternative found by the federal government to save the energy distribution service in Amazonas. The alternatives, which would be the expiration of the concession or intervention in the company, would bring high costs to public coffers and electricity bills.
On June 13, the government published the MP (provisional measure) 1,232 of 2024. It stipulated the possibility of transferring share control as alternative to forfeiture (revocation) of the distributor’s concession, recommended by Aneel in 2023. As the MP was not voted on by Congress –and nor should it be–, it is on track to lose its validity on October 10th.
The MP demanded that any proposal by Amazonas Energia must go through Aneel, which is responsible for evaluating whether the plan meets the rules. The agency may make additional requirements to authorize the addendum to the contract, which will need “to provide for the conditions to promote the recovery of the economic and financial sustainability of the electricity distribution service, with a view to obtaining the lowest tariff impact for consumers”.
According to the June MP, if control of Amazonas is transferred, regulatory targets and operational costs will again be made more flexible for 3 tariff cycles, that is, 15 years. Among them are:
- operating costs;
- rate of non-technical losses (energy theft);
- default rate.
While operational costs will be compensated by the CCC, the lighter loss and default targets affect the value of electricity bills in the State. These indicators are taken into account by Aneel when setting tariffs. When they are above the limit, the distributor is penalized. In the case of Amazonas, there is greater tolerance.
Read the chronology of the case and the full documents:
- 20.Jul.2023 – concierge (PDF – 438 kB) of the MME creates a working group to study the Amazonas Energia problem;
- Nov 21, 2023 – dispatch (PDF – 153 kB) Aneel recommended to the MME the expiration of the Amazonas concession;
- 22.Feb.2024 – MME working group publishes report (PDF – 2 MB) giving the government 3 ways to solve the problem: THE) expiry of the contract, B) intervention in the distributor and W) adoption of a legislative measure making rules more flexible for Amazonas Energia and resolving the company’s operating costs;
- 13.jun.2024 – federal government publishes the MP 1,232 (PDF – 151 kB), which authorizes new cost flexibility for Amazonas and the possibility of transferring the company to another economic group, for a symbolic value, as an alternative to forfeiture;
- 1st.Jul.2024 – Amazon submit to Aneel the transfer proposal made by Âmbar/J&F through 2 of the group’s investment funds (the document containing the proposal is confidential);
- 23.Sep.2024 – 1st degree federal judge of Amazonas grants injunction (PDF – 320 kB) in service to the distributor determining that Aneel approves the transfer proposal within 48 hours from the notification (delivered on September 25th, at 4:40 pm);
- 24.Sep.2024 – Aneel technical superintendencies issue technical note (PDF – 2 kB) which recommends the rejection of the transfer proposal and reinforces the indication of expiry;
- 26.Sep.2024 – Amazonas Energia informs Aneel about changes to the original Âmbar/J&F proposal at the end of the night. A new amendment was presented on September 27th (documents under secrecy);
- 27.Sep.2024 – Aneel holds an extraordinary meeting to judge the case within the deadline given by the Court, but the board does not reach consensus and voting ends in a tie. There were 2 directors against, following the vote (PDF – 937 kB) by the rapporteur, Ricardo Tili. And 2 in favor of the transfer, according to the dissenting vote (PDF – 506 kB) by director Agnes Costa;
- 28.Sep.2024 – Amazonas Energia enters with new action (PDF – 183 kB) in the Amazonas Court asking for the adoption, as a preliminary injunction, of intervention measures in the agency to approve the transfer, such as giving the director general a casting vote or the right to issue a monocratic decision on the case;
- October 1, 2024 – Aneel forms a majority to approve an alternative transfer plan, prepared by the technical area, with tougher rules and lower costs for the CCC. J&F Group will have 24 hours to say that it will take over the dealership under the new terms;
- 2.Oct.2024 – Âmbar rejects Aneel’s alternative plan and files an appeal asking for the approval of a new proposal, costing R$2 billion less;
- 7.Oct.2024 – Aneel approves transfer under the original terms proposed by the companies through a monocratic decision by the general director, in compliance with the court decision.
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