By Rodrigo Viga Gaier and Gabriel Araujo

RIO DE JANEIRO/SAO PAULO – Brazil’s government pushed ahead with plans to privatize Eletrobras (Latin America’s biggest utility) as it priced the share offer through which it will diluted its stake.

Centrais Eletricas Brasileiras SA (as the utility is officially known) stated that Friday’s offering had been priced at 42.00 Brazilian Reals per Share, and total funds raised of 29.29 billion Brazilian Reals ($5.97 Billion).

The firm announced that it had only issued a primary offering for new shares and that it also offered a small secondary offer of shares from the state development bank.

A greenshoe option that aims at price stabilization can be fully used to increase the offer by 15%. The total amount is now 33.68 billion Brazilian Reals ($6.87 Billion).

Sources claim that the demand was strong, which allowed for the sale of the extra allotment, making this the second largest share offering in the world.

Reuters reported pricing on Thursday night, citing two sources who were familiar with the matter.

Jair Bolsonaro believed privatizing the utility would be crucial. He has yet to fulfill his pledges before becoming president in 2019.

Bolsonaro is a self-proclaimed proponent of free markets and will face Luiz Inacio Lula Da Silva, an opponent to privatizations, in round one of the presidential elections on October 2.

Sources said that the Brazilian government’s largest ever share sale was in demand at over $14 billion. This deal included investors such as pension funds, investors from the state, investors who have long-only portfolios and hedge funds.

Rodrigo Crespi from Guide Investimentos, an analyst said that the high demand for follow-on offerings is yet another positive sign in the privatization process.

Pricing at 42 Reals represented a discount of 1.17% from the closing price for shares in Eletrobras Thursday.

Preferential shares in Eletrobras fell 5.7% to 40.06 Brazilian Reals on Friday. This made the utility the largest loser of Brazil’s stock market, which dropped 1.3%.

Sidney Lima from Top Gain said that there is not panic but a speculative move. He also noted that many investors who purchased shares of Eletrobras in recent times were selling their positions once the price was fixed.

The utility’s share of the government is likely to fall from 72% down to around 45%.

No foreign or domestic investor was able take over the company unlike other major state asset sales. There was also a 10% voting limit on each stake. Eletrobras has yet to announce its new shareholders.

($1 = 4.9043 reais)