Leading Eletrobras since 2016, CEO Wilson Ferreira Junior found a company in profound crisis and, as a result of his work, the company’s market value rose from R$ 9 billion to R$ 50 billion in the biennium 2016-2018
The deep crisis faced by Eletrobras is overcome. Leading the company since 2016, Wilson Ferreira Junior is reaping the results of the work he has been undertaking to reduce a sequence of financial losses, low investment capacity and difficulty in fundraising. And there is no lack of noteworthy examples of these results: the company’s market value rose from R$ 9 billion in early 2016 to R$ 50 billion in February 2019. In 2018, the privatization of the distribution companies that were part of the Eletrobras group and the selling of minority shares in 26 joint ventures amounted to R$ 1,3 billion and were key steps in accomplishing the company’s recovery strategy. The effects of these divestments were reflected in the reduction of the company’s financial leverage and the improvement of its Ebitda. In the 1Q19, the net debt / adjusted Ebtida ratio reached 2.2, a substantial reduction from the high ratio of 8.5 in September 2016. As an important indicator of a company’s financial health, the number illustrates the challenges and efforts implemented in order to achieve sustainable excellence.
Championing a wide restructuration program, Wilson Ferreira Junior prioritized initiatives based in principles of financial discipline and operational excellence, as well as governance and compliance. The schedule of many delayed important projects were caught up and, in 2018, Eletrobras achieved the implementation of the Mauá 3 thermal plants, with 590.7 MW total power, as well as the investment in São Manoel hydroelectric plant, with a 700 MW installed capacity. In 2019, the construction of Sinop hydroelectric plant, with 402 MW, will be concluded, and Belo Monte, with 11,233 MW of installed capacity, the third largest hydroelectric plant in the world, will reach full operational capacity. Concerning operational excellence, the implementation of two programs alone – Shared Service Center and Integrated Management System –, the standardization and optimization of processes allow an annual economy of R$ 617 million. The voluntary dismissal programs, in turn, provided a R$ 309 million for the company in 2018. These programs are still open and, until June 2019, were joined by 437 employees, amounting to an estimated economy of R$ 181 millions per year.
In the governance and compliance areas, Eletrobras set up its Statutory Audit Committee and, for the first time, made an independent evaluation of holding’s and controlled companies’ governance bodies. As a recognition of these improvements, Eletrobras was certified in the State Companies Governance Highlights program of B3 (Brazilian Stock Exchange), returned to the Corporate Sustainability Index (ISE – B3), and, for the second consecutive time, was granted the highest grade in the IG-Sest governance indicator. Meanwhile, the inquiries of the Securities and Exchange Comission (SEC) and of the litigators in the class action against Eletrobras abroad were closed, as well as the discussions with the Department of Justice of the United States, which declined to sue the company. The new era of the company is well represented by the modernization of its operational structures and by its new installations. For the first time in 57 years of history, Eletrobras’ main office, in Rio de Janeiro, was concentered in only one building and, since December
2018, have been providing economy and work synergy. In December 2018 as well, Eletrobras started its 2019-2023 Business and Management Master Plan, which establishes five strategic guidelines: Profitable Growing; Sustainable Performance; People Valorization; Operational Excellency; and Improvement of the Corporate Governance and Integrity.
Clean and renewable
Around 95% of the company’s installed capacity comes from sources with a low emission of greenhouse gases, such as solar, nuclear, wind and hydroelectric energies, which makes Eletrobras one of the largest companies in the world in the generation of clean and renewable energy and the one that contributes the most for the Brazilian electrical matrix, being the second cleanest and most renewable in the world, pursuing this way the mission and vision of its Strategic Plan. As a signatory of the Global Pact, in 2018, Eletrobras continuously supported important initiatives, such as the adherence to the Brazilian Business Commitment for Water Safety and to the projects selected in order to prioritize the Sustainable Development Objectives (ODS), which are part of the UN 2030 Agenda. Given its participation in the country’s electrical matrix, in 2018, of the whole amount of installed capacity coming from low greenhouse effect gases
emission, 41% belongs to Eletrobras. In 1Q19, Brazil reached 163.8 GW in installed capacity, 49.7 GW of those coming from Eletrobras, which means 30.3% of the whole generation of the country. The transmission lines net of Eletrobras’ companies reached, in 1Q19, 71,253 km, representing around 47% of the total lines with or superior to 230kV in Brazil.
Wilson Ferreira Junior is about to complete three years in charge of the largest electric power company in Latin America, accumulating significant results in the management of Eletrobras and motivated to go even further. “Our great achievement was to recover the confidence of the market and of society as a whole in Eletrobras”, he summarizes. In this interview, the executive tell us about his main accomplishments as head of the company, having as strategic guidelines
the principles of governance and compliance, financial discipline and operational excellence.
The Winners – What is the importance of Eletrobras for the Brazilian electric sector?
Wilson Ferreira Junior – the trajectory of Eletrobras, created in 1962, is so important to the Brazilian electric sector history – regarding its role to contribute to the development of the country, generating wealth and jobs – we can almost say they are the same thing. Being the leader of Eletrobras, the largest player in this industry in Brazil, means leading the largest electric power company in Latin America and the fifth largest hydropower generation company in the world – responsible for about a third of all the country’s power generation – as well as almost half of the transmission system that connects all the regions of Brazil. This information gives the idea of the dimension of the company’s relevance, not only to the sector in which it operates, but also to millions of Brazilians, who count on Eletrobras contribution every day, to guarantee the energy they need in their homes, jobs and in their lives in general.
TW – What are your main challenges as a CEO?
WFJ – when we arrived, in 2016, Eletrobras was going through the biggest crisis in its history. The company had a gross debt of R$ 45.5 billion, deepened by the decision of the government at the time to make the company take part in large projects when Eletrobras was already suffering losses. The government provisional measure 579, in 2012, reduced the value of the tariffs in the concessions of Eletrobras subsidiaries that would expire in 2015, which worsened the company’s financial situation, leading it to accumulate in only four years losses of more than R$ 30 billion and to lose 20% of its Net Operating Revenue. The company’s equity was reduced in approximately 45% from 2011 to 2015. Delays
in constructions and material weakness – warning signs for the control process in a company – were elements we had in addition to this scenario of crisis.
TW – Given this scenario, what actions were taken?
WFJ – As the CEO, I made an underlying commitment to change. The company had to be restructured. And so we did. With the support of the Federal Government and of the Ministry of Mines and Energy and with all the technical expertise of our staff, we have chosen “sustainable excellence” as a motto, to motivate the implementation of a wide restructuring program in the company, embodied in the Business Master Plan and in the Eletrobras Business Management. The strategies and initiatives were based on the pillars of Governance and Compliance; Financial Discipline; and Operational Excellence.
TW – What is the overall balance of your management so far?
WFJ – Today, we can say that Eletrobras is stronger. All these actions were thought to prepare the company for the future, making it capable of competing on an equal basis with the major groups in the international power sector. We believe that efficiency and transparency are fundamental values to raise our credibility with investors, partners, shareholders, employees and with the Brazilian society as a whole. This new chapter we are writing in the history of Eletrobras aims to make the company a synonym for innovation, efficiency and solidity, so that it can continue to follow this path of sustainable excellence. We are a global company, committed to the future of the planet and to the sustainable growth of our country. We may say, committed especially to the development of Brazil today and for our next generations.
TW: You mentioned transparency as a fundamental principle. What has Eletrobras been doing for that matter?
WFJ – With the priceless institution of the State Owned Companies Law (13,303), we started to implement important changes in our governance. Through the Eletrobras Compliance Board, created to reinforce our internal controls, our complaint channels and our ethical culture, we launched the “Eletrobras 5 Dimensions Integrity Program”, in order to strengthen the environment control, comply with legal standards and regulatory requirements, as well as to avoid, detect and deal with any diversions or nonconformities. Among several initiatives, the 5 Dimensions updated, in December 2016, the Code of Ethics and Behavior of Eletrobras Companies and implemented an external reporting channel. Moreover, we have a true dream team in our Board of Directors, formed by renowned market professionals, who became part of the company, reinforcing the major stockholder commitment, which is to change the company.
TW – How do you think the market perceives these actions?
WFJ – The market has already recognized our efforts. We were certified in the State Companies Governance Highlights Program of B3, meeting six mandatory measures, and we returned to the Corporate Sustainability Index (ISE), also of B3. We obtained maximum score in the governance indicator IG-Sest, of which we are part, with excellence level, since its first edition, in 2017. Perhaps the greatest challenge that we faced, still in 2016, was related to the pillar “Governance and Compliance”, having successfully filed the Securities and Exchange Commission (SEC) financial forms (20-F) of 2014 and 2015. If we hadn’t, our shares would be unlisted on the New York Stock Exchange. Today, we can say that our great achievement was to regain the trust of the market and society on Eletrobras. Now the future awaits us. We are preparing the company for this future.
In charge of Eletrobras since 2016, the Corinthians supporter Wilson Ferreira Junior uses his passion for soccer to explain what he considers to be the biggest challenge of his career: “I use to say that to be in charge of Eletrobras is like being called to the Brazilian Soccer Team. When I was young, there was no such honor for a Brazilian soccer player than to play for the National Team. So of course I accepted immediately the invitation” The references to the favorite sports of the Brazilians also apply to the concepts of management followed by the executive: “With the experience I have accumulated I learned that to be successful in management you need dedication, discipline e seriousness. You need to get the best in people. Because you get all the result you need from the people. So the secret is to integrate them, getting their commitment. You need to be able to give the people a sense of purpose, so that they feel they are truly
part of a team” he says. Wilson graduated in Electrical Engineering for the Mackenzie University, in 1981, and, almost at the same time, took the graduation course of Business Management in the Economic, Accounting and Management Sciences College of São Paulo University (USP). Working in the electric sector came as a natural choice.
“The Brazilian electric sector, for its strength and for all that it represents for the development of the country, is naturally a dream job for all the young engineers who are starting their professional lives. But early on I also took this road that led me to this career, more focused in management within the sector”. All in USP, he took the Masters course in Energetic Planning. Specializations such as Work Safety (Mackenzie), Marketing (Fundação Getúlio Vargas) and Electric Energy Distribution Management (Swedish Power Co.) complement his academic formation.
Professionally, he started his career in the São Paulo Energetic Company (Cesp), where he held several positions, starting as a trainee and ending as the Distribution Director (1995-1998). After this experience, he was invited to be the CEO in Rio Grande Energia (RGE), from 1998 to 2000, and then CEO in CPFL Paulista, from 2000 to 2002. “After 2002, I took charge as CEO in CPFL Energia, what gave me the opportunity to build the biggest private distribution company of Brazil and one of the biggest in the generation and transmission sectors”, he adds. Meanwhile, he was also president of the Brazilian Association of Electric Energy Distibutor (Abradee), from 2009 to 2010, and of the Brazilian Association of Infrastructure and Core Industries (Abdib), from 2014 to 2016. “Leadership must be improved on a daily basis. It involves the capacity to create dialogue, courage to make decisions and to assume not only the bonus, but the onus of the decisions. A good leader is someone who puts challenges for the employees, sharing causes with them. And, furthermore, he facilitates the process of engaging them. He can put in a more clear way his causes and challenges. And, in the end of the day, the people only get mobilized for causes and challenges”, he concludes.