BTG will back 75% of the capital increase; company expected to be its main platform in the sector
07/17/2024
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Lino Cançado — Foto: Divulgação
Power generation company Eneva is acquiring four thermopower plants from BTG Pactual and will carry out a public offering of up to R$4.2 billion to back the acquisition and reduce leverage.
In the deal, BTG commits to backing up to R$3.2 billion in the base offer at R$14 per share, which corresponds to Eneva’s shares average price over the last 60 trading sessions on the B3 stock exchange.
The deal also places the bank as a primary shareholder with the possibility to double its stake in the company, currently at 23.3%. Under the new arrangement, BTG ensures that the company will be its investment platform in energy generation and natural gas assets in Brazil. On the other hand, the bank cannot vote at the meeting to approve the deal, as it is the seller of the assets and the company’s primary shareholder.
That was one of the conflicting points identified among minority shareholders, Valor learned from two sources. There was disagreement among shareholders and management about the direction of the company.
One party defended running Eneva as a corporation (with dispersed ownership). However, the existence of two relevant primary shareholders—BTG and the Cambuhy fund—generated conflicts. Minority shareholders raised the governance issue as a sensitive point, according to these two people familiar with the matter. There was some discomfort given the fact that BTG held other assets in the sector, in addition to Eneva. The bank and the Cambuhy fund did not immediately respond to Valor’s requests for an interview.
The announcement of the deal was expected by the market. With the capital increase, backed by BTG by around 75%, the company will be able to support the acquisition of the four thermal plants (estimated at R$ 2.9 billion) and will seek to reduce its debt, says Eneva’s CEO Lino Cançado. The announcement of the deal did not excite investors in the stock market on Tuesday (16). Eneva’s shares closed the trading session with a slight increase, of 0.23%, at R$ 13.28. BTG’s shares fell 0.37%, to R$32.05. Benchmark stock index Ibovespa ended the day 0.16% down.
The question in the market is whether the other shareholders will follow this offer to avoid capital dilution. Sources interviewed by Valor argue that the shareholders need time to evaluate the offer.
At the end of last year, Eneva proposed a “merger of equals” with Vibra. The proposal did not move forward, as the fuel distributor considered that the valuation placed the company in an unfavorable position and that the share exchange ratio would not be fair as originally proposed. Therefore, negotiations did not move forward.
In a conference call with analysts and investors, Mr. Cançado said the acquisition of BTG’s thermal plants is in line with Eneva’s businesses. He emphasized that the deal will diversify Eneva’s geographic position, currently focused mostly on the North and Northeast regions.
Eneva will issue 126,071,428 new shares to BTG, considering the asset price of R$1.76 billion, to acquire two thermal plants: Tevisa and Povoação. The deal also includes BTG’s rights issue to up to 16,330,346 shares. The other two thermal plants, UTE Linhares and Gera Maranhão, are priced at R$1.14 billion. The acquisition of these two plants will be backed with the offering funds.
Due to three large acquisitions carried out by Eneva in 2022, the company’s leverage, measured by the net debt/EBITDA ratio, is 4.1 times, according to the financial statements for the first quarter of 2024. The acquisitions involved the incorporation of Focus for R$936 million, plus the acquisitions of Celse for R$6.1 billion and Termofortaleza for R$489.8 million.
“The deal strengthens Eneva’s balance sheet through the public offering and acquisitions generating cash in the short term, when Eneva is committed to a large investment program, including ongoing projects. It will also have a significant impact by reducing debt,” Mr. Cançado said.
Eneva is also considering re-purchasing 148 megawatts (MW) of installed capacity from the plants involved in the deal with regulated contracts expiring in December 2025.
Marcelo Lopes, Eneva’s chief commercialization officer, said in a conference call that there is an estimate of a potential increase in the company’s installed capacity of up to 3.3 gigawatts (GW). For Mr. Lopes, the distribution of thermal assets in three states enables access to liquefied natural gas (LNG) terminals, with around 1.1 GW located in Espírito Santo, including access to the TAG network and possible gas supply from the Sergipe hub, with the participation in the capacity reserve auction. “The acquisition gives us competitive strength to participate in the auction and meet the sector’s demand.”
Edvaldo Santana, a former director at the Brazilian Electricity Regulatory Agency (ANEEL), points out that Brazil has no problem related to energy supply or security, but rather to meeting the peak of demand, between 6 pm and 9 pm, when solar power generation stops and electricity consumption in homes remains high. Mr. Santana says Eneva could tap into relevant businesses, as the security of the service and the reliability of the electrical system have been met by thermoelectric plants dispatch during times of high demand.
With the deal, Eneva estimates the company’s revenue will grow to R$12.2 billion, from R$10.1 billion in 2023. EBITDA (earnings before interest, taxes, depreciation, and amortization) could increase to R$6.1 billion. Eneva’s net earnings of R$200 million in 2023 would be added to the thermal plants’ profit, to reach R$1.6 billion in projected net earnings. The company did not provide a deadline for achieving this target.
For Ativa Investimentos analyst Ilan Arbetman, the deal could face questions about governance, since BTG is also a relevant shareholder of Eneva. “The board approved it and the BTG member declared himself unable to vote, as reported in the conference call. It remains to be known whether the same will happen in the general shareholders’ meeting.”
Eneva expects that the meeting aimed at evaluating the deal will be held in the third quarter of 2024. The deal also pends approval by the Administrative Council for Economic Defense (CADE) and the Central Bank.
The analyst also says minority shareholders may consider the deal as positive as it provides room for the company to open new investment fronts and pay dividends. “Last year the company said it could pay dividends at the end of 2023, and then moved to the beginning of 2024. With recent acquisitions, the possibility of compensating shareholders has fallen off the radar.”
*Por Kariny Leal, Robson Rodrigues, Mônica Scaramuzzo, Felipe Laurence, Maria Luíza Filgueiras — Brasília, São Paulo
Source: Valor International