Privatization: good or bad? Lessons from the electricity distribution sector in the northeast of Brazil

Abstract

This paper analyzes the evolution of five electricity distribution companies in the Northeast of Brazil using technical and financial indexes. Three privatized and two public firms were analyzed between 1997 and 2008. The financial indexes are related to the profitability and firm’s capacity of generating value for its shareholders, while the technical indexes are related to the quality of the service provided. Two propositions are developed suggesting that privatized firms had their financial and technical indexes improved after privatization when compared to the public firms. We observed the privatized firms had their financial indexes improved after the privatization, increasing their value for the shareholders. However, it was not possible to observe evidence that privatization affected the quality of service provided.