Lawyers are afraid to forfeit R$120 billion in dividends

Due to the recent change in pricing policy, Petrobras (PETR3; PETR4) was the subject of a lawsuit filed on Friday (26) in the 17th Federal Civil Court of São Paulo, affiliated to the Court of Justice of São Paulo. Citing a “lack of transparency” from the new fuel pricing policy approved by the State Council last week, the lawyers believe there could be harm to the Treasury in substituting the price for the import parity, the producer price index.

in the petition he received financial intelligenceAttorneys Rafael Mortari and Adelson Polico da Silva noted that Petrobras’ new pricing policy could “endanger the company’s financial balance.” They explain that this may be caused by a “loss of price-cost correlation” for international fuels.

In the document, the lawyers also indicate that there could be a negative impact of R$120 billion on Petrobras’ earnings, based on the amount transferred in 2022. The injunction requires the justice to restore PPI immediately.

What prompted the opening of the lawsuit against Petrobras?

According to Mortari and Polico, the change in Petrobras could harm its “market reputation, the value of its assets, and thus the equity of the union, with negative implications for the entire national fuel industry.”

The replacement of the PPI could, according to the lawyers, harm Brazilian citizens “in an unfolding period of time that, because it is not immediate, can go unnoticed”.

What is the new pricing policy of Petrobras

The new price policy of the state-owned oil company was defined by the Board of Directors and by Jean-Paul Prats, President of Petrobras, as an “option cost for the customer”.

The measure consists of making fuel prices more flexible according to the region and the operational cost of Petrobras to transfer inputs to distributors.

Experts criticized the lack of clarity of the change, which may mainly benefit large refineries.

The petition accuses the new policy of “ending the period of transparency in setting prices”, taking into account international oil parity.

In this sense, the lawyers pointed out the lack of clarity of the essential truth revealed by Petrobras in explaining the change, as well as in Pratis’ statements on this subject.

“The concepts of ‘option cost to the customer’ and ‘marginal value’ are questionable, ambiguous, and ambiguous in the market and in the relevant literature. In fact, the memorandum does not explain, objectively, what will be the new standard for price formation,” say the lawyers.

In addition, the lawyers highlighted the double reduction of Petrobras shares provided by UBS BB. The bank used the change in pricing policy to guide the decision to downgrade the shares of the oil company ON and PN.

‘Don’t move’ PPI and Petrobras earnings, lawyer says

In an interview with financial intelligenceAdilson Bolico da Silva explains that the petition was opened because Petrobras’ decision could have a negative impact on the capital market, as well as on the collection of profits from the states and the federation.

In the petition, the lawyers point out that PPI — the old pricing policy adopted by Michel Temer’s government in 2016 — has led Petrobras to “strong growth” and operating profits of R$106.7 billion in 2021 and R$188, R$7 billion in 2022. .

Since most of Petrobras’ operating costs are in dollars, the lawyers point out, the PPI mechanism captures the cost price of the operation, which is absorbed by the company, plus exchange rate fluctuations.

“The script that was working has changed. On a team that wins, you don’t change, but the new board’s attitude seems to change anyway,” says Policco. if. He claims that the Petrobras billionaire’s earnings mainly benefit the federation.

Because of the lack of transparency of the new standards [dos preços dos combustíveis]We decided to question her,” the lawyer continues.

For Bolico, the Petrobras board must submit studies and research supporting the new “alternative cost to customer” policy in response to the court petition. As much as they say this policy is easy to understand, it is not. No one knows how to say today what the new standard is and whether or not it will harm the company’s price and cost matrix, ”concludes Polico.

Impact of R$120 billion on Petrobras (PETR; PETR4) earnings

Lawyers estimate that the waiver of PPI due to the “alternative cost to the customer” policy could generate a negative impact of approximately R$120 billion on Petrobras’ earnings.

In 2023, Petrobras’ first-quarter operating profit amounted to R$106.7 billion, while tax collection for federal entities in the federation amounted to R$76.7 billion.

In its balance sheet disclosure for the first three months of the year, Petrobras distributed R$24.65 billion in dividends to shareholders, which equates to R$1.89 per share. Last year, the oil company transferred a total of R$72.7 billion to shareholders.

In 2022, R$217 billion was paid out in dividends to shareholders, 28.7% of which was distributed to the federation, i.e. R$62.3 billion was disbursed to the coffers of the federal government.

“It is likely that the union would resign and risk the potential negative effects of the PPI expiry on the company’s earnings generation – and that, at least measurable at this moment, is the commodity seeking injunctive protection,” the petition says.

the other side

a if He approached Petrobras, but until early Friday afternoon (26th), the company had not commented on the fact. Once there is a position on assessment in court, this text will be updated.