Petrobras Board Calls for Meeting to Oust CEO

Gram Slattery, Marta Nogueira and Sabrina Valle
Wednesday, February 24, 2021

The board of Brazilian state-run oil company Petrobras on Tuesday called an extraordinary shareholders' meeting, a move that all but guarantees the exit of Chief Executive Roberto Castello Branco.

In a statement, Petroleo Brasileiro SA, as the company is officially known, said it had called the meeting in response to a request by the nation's Mines and Energy Ministry.

At the meeting, shareholders are expected to formalize the replacement of Castello Branco with Joaquim Silva e Luna, a general picked by President Jair Bolsonaro.

Petrobras' statement on Tuesday evening largely puts to bed the possibility of a protracted legal and political fight surrounding the CEO swap. Although seven of the 11 Petrobras board members are appointed by the government, most had remained loyal to the classically conservative Castello Branco in recent weeks, even as he came under pressure from Bolsonaro, according to two sources with knowledge of the board's thinking.

But shortly before the meeting, a vote on re-electing Castello Branco for another term was replaced with one setting up the shareholders meeting, one of the sources said.

In the statement, Petrobras quoted the board as saying it "will continue to watch over governance standards at Petrobras, including what those standards say with respect to the pricing policies of the company's products."

Bolsonaro criticized Castello Branco last week after a series of fuel price increases, spooking investors over a possible return to politically motivated pricing that hammered Petrobras' revenue over the past decade.

Bolsonaro on Tuesday told supporters there were "many things wrong" at Petrobras. "The new CEO will clean things up there," he added.

Talk of a mass board resignation to protest against Castello Branco's replacement emerged last week, but has largely faded since Bolsonaro officially said on Friday he was appointing a new CEO, sources close to the matter said.

Both the board of directors and executive management are expected to stay until at least the end of their terms - which for the management expires on March 20, the people said. Only isolated possible departures in the mid-term are being considered, the people said.

The board meeting was still ongoing as of the evening, one source with direct knowledge of the matter said.

The exact vote tally on the matter was not immediately clear.

Luna, who has been running the giant Itaipu hydroelectric dam on Brazil's border with Paraguay, has already signed documents that will kick off the standard pre-hiring ethics scrutiny at state-owned Petrobras.

Under Brazilian law, an extraordinary shareholders meeting takes place 30 days after the board called for it.

Following the meeting, two sources said, the board will likely require several days to go over compliance-related documentation before Silva e Luna is officially named CEO.

Brazil-listed preferred Petrobras shares closed up 12.17% on Tuesday, a day after plummeting 22%.

($1 = 5.46 reais)

(Reporting by Gram Slattery, Marta Nogueira and Sabrina Valle Additional reporting by Rodrigo Viga Gaier and Gabriel Stargardter in Rio de Janeiro and Paula Laier in Sao Paulo Writing by Christian Plumb Editing by David Goodman, Lisa Shumaker and Richard Chang)

Categories: Energy People Industry News Activity South America People and Companies

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