Eletrobras can join pension funds, creating a R$40 billion giant, say sources

São Paulo, June 17 – The privatization of Eletrobras has resurrected the possibility of a merger of pension funds linked to the company, which would create the fifth largest foundation in the country, with more than R$40 billion under management, four sources with knowledge of the matter told Scoop by Mover.

The merger, which has the potential to be one of the largest in the country in terms of joint equity, would accelerate the reduction of costs related to the structure of the complementary pension funds and the equating of actuarial deficits at Eletrobras and its subsidiaries, which together have more than 45,000 participants in its plans, the sources said.

“In addition to the unified fund rising in the ranking of supplementary pension entities, an eventual consolidation provides strength and gains in scale,” said one of the sources, who requested anonymity to speak freely about the plan.

Existing foundations include Eletros, from the Eletrobras matrix; Real Grandeza, from Furnas; Fachesf, from Chesf; Previnorte, from Eletronorte; and Elos, from Eletrosul. Sought after, Real Grandeza, Eletros and Elos did not comment on the information. Fachesf and Previnorte did not immediately respond to requests for comment.

If the project comes to fruition, the new unified foundation would have assets close to that of Vivest, which occupies the fourth place and totals R$46 billion in resources under management. Leading would be Previ, with around R$270 billion, Petros, with more than R$114 billion, and Funcef, with R$91 billion.

According to another source, the unification of foundations was already studied by Eletrobras before privatization. This illustrates one of the alternatives that the company is considering to reduce necessary expenses – one of the reasons that led to its privatization.

According to Eletrobras, last year the company and its subsidiaries contributed R$294 million in contributions to their respective retirement plans. In 2021, the company recorded a deficit of R$5.8 billion in its pension plans and those of its subsidiaries.

Deficit Equation

The deficit of each of the plans can be addressed, if the amount exceeds the legally stipulated limit for the purposes of equating, which causes both Eletrobras and the plan participants to make extraordinary contributions in order to restore the balance of the plan.

In this case, each pension fund presents a deficit-equation plan defined in the installments and the periods for the extra contributions. Some foundations recorded deficits in 2021 and will need to present plans for remediation this year, as is the case with Real Grandeza.

Eletros, Elos and Fachesf also have a deficit-equation plan in place.

To try to mitigate the risks, new defined contribution plans, which do not have actuarial risk, were created with the sponsorship of Eletrobras subsidiaries, with the opening of the migration process of participants of the defined benefit and variable contribution plans, which are subject to risks actuarial for these new plans.

Eletrobras also said in its fourth quarter balance sheet that, “still in perspective for 2022, knowledge management initiatives, optimization of private pension and health care benefits will be developed”.

Even if the risks related to the deficit equation scare the new controllers of the privatized company, the sources say that the best way is still to keep the pension benefit plans under the umbrella of Eletrobras.

Getting rid of the plans, which amounts to a withdrawal of sponsorship, has two drawbacks, according to one of the sources.

“If the plan in question is in deficit, the sponsor has to pay all the shortfall in cash”, points out the source. The other problem, he said, would be employee resistance.

*This report was first published on June 15, exclusively for subscribers. Want to receive scoops and news first hand? Then sign one of the TC plans.

Text: Bruna Chieco
Editing: Guillermo Parra-Bernal
Image: Vinicius Martins / Mover
Comments: [email protected]

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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