Brazilian exports of steel products to the country totaled $5.1bn last year
10/28/2022
The United States decided not to extend countervailing antidumping measures against Brazilian exports of hot-rolled steel products, which were in force since October 2016, according to a note released by Brazil’s ministries of Economy and Foreign Affairs on Thursday. The note mentions the United States International Trade Commission (USITC).
“The decision, announced last October 21, stems from the conclusion that the termination of the measures for Brazilian exports would not lead to the continuation or recurrence of material injury to the U.S. industry, which was demonstrated throughout the review process by exporters and through the joint action of the Ministry of Economy and the Ministry of Foreign Affairs,” it says.
Thus, no more additional taxes of up to 45.58% (34.28% antidumping duty and 11.3% countervailing measure) will be charged on imports of hot-rolled products from Brazil.
Still according to the two ministries, there were no changes in relation to other countries subject to the same measures (Australia, Japan, South Korea, Netherlands, Russia, Turkey, and the United Kingdom, in the case of antidumping duty, and South Korea, in the case of countervailing measure), which means that Brazil was the only country excluded.
In July, the Commission had taken a similar decision, regarding Brazilian exports of cold-rolled steel products. There were additional duties of up to 46% (35% antidumping duty and 11% countervailing measure), which were no longer charged. Likewise, Brazil was the only country excluded from the list of exporters whose sales were surcharged.
Brazilian exports of steel products totaled $9.3 billion last year. Of this, $5.1 billion were destined for the United States.
Also according to the note, hot-rolled steel products represented, before antidumping and countervailing measures, exports of nearly $150 million to the U.S. market.
Group is targeting concessions in three states, São Paulo, Minas Gerais, and Rio Grande do Sul
10/28/2022
Carlos Eduardo Castro — Foto: Silvia Zamboni/Valor
The Águas do Brasil group is getting ready to dispute new sanitation contracts. At least three projects are on the radar: the municipal concessions of Marília (São Paulo) and Nova Serrana (Minas Gerais), in addition to the privatization of Corsan (Companhia Riograndense de Saneamento), according to Carlos Eduardo Castro, who will take over as the company’s head of new business and regulation on November 1.
The executive headed Águas do Brasil until 2019, when he left the group to take command of Copasa (Companhia de Saneamento de Minas Gerais). Now, Mr. Castro ends a four-month quarantine after leaving his position at the state-owned company and returning to the private group. “My return matches a new moment for the group. Today it is a company of a different size, which went through a corporate reorganization and has the appetite to grow in a structured way,” he says.
In August, the company officially took over the new contract in Rio de Janeiro, which was won in an auction at the end of 2021. In this operation, in which Águas do Brasil is a partner of the management company Vinci Partners, investments of R$4.7 billion are foreseen for the universalization of services in the west zone of the state capital and 18 other cities in the state of Rio de Janeiro.
Even with the new operation, the group is already prepared to bid for auctions, according to Mr. Castro. Today, at least three projects are on the radar: the municipal concessions of Marília (São Paulo) and Nova Serrana (Minas Gerais), as well as the privatization of Corsan (Companhia Riograndense de Saneamento).
Even with the new obligations assumed, the group can absorb new business, according to Mr. Castro. “In Rio de Janeiro we have set up a capital structure in which the concessionaire will have its own capacity to generate resources and financing, without creating additional commitments for the holding company,” he says.
The group’s forecast is to reach the end of 2022 with revenues of R$1.6 billion, Ebitda of R$560 million, and financial leverage of 2.1 times net debt by Ebitda.
“The group has leverage under control and very positive ratings from credit agencies. In addition, there is an expectation of revenue expansion starting in 2023. The contract in Rio will increase revenue by 50%, and we have a portfolio of mature concessions that allow us to generate cash for new business,” says the executive.
Mr. Castro also highlights that, depending on the profile of the business, Águas do Brasil will seek strategic partners to make investments feasible.
This would be the model in case the company disputes the Corsan privatization auction, says Mr. Castro. “If the bidding takes place this year, we are studying and discussing with potential partners, depending on the size of the operation,” he says.
The Rio Grande do Sul government plans to carry out the privatization in December this year. Sector analysts evaluate that the deadline is tight and point out that the process will depend on the result of the runoff of the elections in the state, in which former governor Eduardo Leite (Brazilian Social Democracy Party, PSDB) is running for reelection against Onyx Lorenzoni (Liberal Party, PL), who has already made statements against the project.
Today, Águas do Brasil’s operations are concentrated in the Southeast region. The group operates concessions in 32 cities in Rio de Janeiro, São Paulo, and Minas Gerais. The presence in these states increases the group’s interest in new municipal projects in the region — such as the Nova Serrana and Marília contracts, which may still be tendered this year. However, the company is also interested in expanding its operations to other regions of the country, says Mr. Castro.
When it comes to choosing the auctions, it will compete for, one of the main criteria for the company is commercial management control. For the group, the interest increases when the contracts offer the possibility of management with the customers because it is an area in which the company can extract many efficiency gains, says the executive.
Not all concessions give the private company this control. For example, in the case of the sanitary sewage PPPs in Ceará, whose auctions were held this year, only part of the operation was handed over, and the commercial management remained in the hands of the state-run company. Águas do Brasil did not participate in this auction. “It doesn’t mean that we won’t enter projects with this profile, but it has less attractiveness,” he says.
The expectation is that the pace of privatizations in basic sanitation will remain high starting in 2023, according to Mr. Castro. “Whatever the winner [of the presidential elections], sanitation will remain on the agenda. It is unthinkable to imagine any setback or measure that does not attract capital. We believe that the issue will be treated less ideologically and more pragmatically”, he affirms.
In his evaluation, what may change depending on the winners will be the profile of the privatizations that will be proposed.
He gives as an example the states of Rio Grande do Sul and São Paulo, where the candidates running in the runoff of the elections have different points of view about the privatization of the state’s water and sewage companies. For Mr. Castro, even those who do not defend the sale of the companies should study other forms of privatization, such as concessions or PPPs. “Regardless of the ideology of the governor, there is an understanding that some movement will have to be made. For the market, this is what matters,” he says.
“In Rio Grande do Sul, we have two very clear situations, with Mr. Leite and Mr. Lorenzoni, who said he would not privatize Corsan. This decision will not prevent the government from looking for another format. Some other model will have to be taken. In São Paulo, [Fernando] Haddad (Workers’ Party, PT) may also seek other paths”, he says.
Concerning Minas Gerais, the executive highlights that it is necessary to overcome some legislative steps to privatize Copasa — it would be necessary to change the State Constitution, which today requires a referendum in case of privatization. “The reelection and the construction of a base will be able to push this and other projects forward. We will have some movement to expand private participation in Minas Gerais, whether it will be a sale or another arrangement, time will tell.”
Between July and September, economy generated 1 million jobs, well below the 3 million in the previous quarter
10/28/2022
Brazil’s labor market ended the third quarter at a still strong pace: the unemployment rate is down and the average income of workers has increased for the first time since the beginning of 2021. Despite the seemingly positive figures, analysts are adopting a cautious tone as they foresee a slowdown in the coming months.
According to data from the Continuous National Household Sample Survey (Pnad Contínua), Brazil’s unemployment rate stood at 8.7% in the September quarter, down 0.2 percentage point compared with the August quarter.
The result was in line with the median of projections collected by Valor, which ranged between 8.6% and 8.8%. In the same period of 2021, the unemployment rate was 12.6%.
This means that the country had 9.5 million unemployed people – people aged 14 or older who looked for a job in the period but could not find one. This is the lowest since the fourth quarter of 2015. The employed population, meanwhile, reached 99.3 million people, a record since records began, in 2012.
The recovery in employment seen since last year has been driven by commerce, services, and public administration, said Adriana Beringuy, the coordinator of labor and income at the Brazilian Institute of Geography and Statistics (IBGE). The latter contributed to one third of the jobs generated in the last quarter – 291,000, up 8.9% year-over-year.
The growth was stronger among those who hold informal jobs in the public sector. In this group, the number reached 3.055 million people, also a record.
“This growth in the public sector may be linked to the move to recover the structure necessary to provide these public goods, health, and education. Besides that, there was growth within the public administration itself,” said Ms. Beringuy, who rejected the possibility of such growth having been influenced by the election.
“I think it’s mainly two forces combined. On the one hand, positions in the public sector are being filled again. On the other hand, many temporary jobs have been created in the last few months, especially for people IBGE hired for the census,” said César Garritano, an economist at Renascença.
Despite the improvement, the country still had 23.4 million underutilized workers in the third quarter. The contingent of informal workers reached 39.145 million in the third quarter. Nevertheless, given that the number of formal jobs was higher, the economy’s informality rate fell to 39.4% in the period.
For the first time since the first quarter of 2021, the average income has increased year-over-year – 2.5%, according to IBGE. Yet, this is largely explained by the cooling of inflation in the period, said Ms. Beringuy.
“We were already seeing gains in nominal income, but not in real terms. And this is now happening,” she said.
Rodolfo Margato — Foto: Claudio Belli/Valor
The heated labor market may continue to support the improvement in workers’ income, said Rodolfo Margato, an economist at XP Investimentos. “We believe that real income will continue on a recovery path in the coming months,” he wrote in a comment to clients, recalling that the indicator remains about 4% below the levels seen at the end of 2019.
Despite the good numbers, there is a slowdown in the cards, said Bruno Imaizumi, an economist at LCA Consultores. He notes that between July and September, the economy generated nearly 1 million jobs, well below the nearly 3 million seen in the previous quarter.
“This deceleration is also starting to become clear when you look at the Caged [General Register of Employed and Unemployed Workers] figures. Formal work will not be able to absorb all the people who joined the informal sector in the pandemic,” he said, pointing out that this was a trend that already appeared before the crisis, but was intensified by it.
That said, Mr. Imaizumi notes that the labor market tends to continue presenting positive results in the coming months. Still, the accommodation, food, and domestic services sectors have a deficit of 500,000 jobs compared to the pre-Covid scenario, he said.
Survey by Strategy&Brasil with 750 publicly traded companies around the world show average revenue growth of 3.3% between 2017 and 2021
10/27/2022
A study conducted by Strategy& Brasil, PwC’s strategic consulting arm, with 750 publicly traded utilities companies around the world concluded that electric power and sanitation companies showed better financial performance in the last five years. The companies posted an average revenue growth of 3.3% between 2017 and 2021 driven by the electric power industry, with an average rate of 4.8%, and sanitation, with 4.3%.
The study is based on public data from companies that supply electricity, piped gas, water and sewage, and fuel services, as well as companies classified as “multi-utilities,” which operate in more than one field. The financial data are represented in dollars to gauge the real growth of the companies and allow comparison among them.
The study also shows that the 43 Brazilian companies that were part of the study had a significant improvement in return rates, but shrinking revenue in dollars because of the devaluation of the real between 2017 and 2021, which caused a loss of competitiveness compared to the rest of the industry worldwide.
In the case of Brazilian companies, what has been verified over the last five years was a very significant improvement in the return on invested capital. By the way, most Brazilian companies are classified in study as “cash cows” – an expression for companies with high cash generation.
The problem is that all this evolution ends up being overshadowed by the depreciation of the real from 2017 onwards, which means that although they have grown in local currency, the weakened real has caused Brazilian power companies to lose competitiveness against their global peers, said Daniel Martins, a partner at Strategy& Brasil.
According to Mr. Martins, part of the good performance of the electric power utilities pointed out in the study was due to companies that work with renewable power generation and groups that operate in segments such as distribution and transmission. This is because, according to the specialist, the market’s greater interest in companies linked to the energy transition reflects in better returns and higher growth rates of these companies compared to corporations focused on fossil energies.
As an example, Strategy& shows that the future value-to-EBITDA ratio of renewable energy companies has an average of 11.7 times, against 11.2 times of fossil companies. Renewable companies also had an average real revenue growth rate of 5% per year, against 2.3% for fossil companies.
Another point in question is the execution of the strategies by the companies, which resulted in gains in market capitalization of more than four times the average of the other companies. On the other hand, companies that were not successful in implementing their projects have lost an average of 11% in market capitalization over the last five years.
“This shows that execution is as important as strategy,” said Mr. Martins.
Decision was in line with median of market expectations and signaled in the previous meeting
10/27/2022
Central Bank’s building in Brasília — Foto: Jorge William/Agência O Globo
The Central Bank’s Monetary Policy Committee (Copom) decided to maintain the key interest rate Selic at 13.75% per year on Wednesday, as signaled at the previous meeting in September. The decision was unanimous.
The decision was in line with the median of market expectations. According to a survey conducted by Valor, all 108 financial institutions consulted expected the interest rate to remain at 13.75% per year.
In the statement released on Wednesday, the Copom said the decision reflects uncertainty surrounding its scenarios and balance of risks with even greater than usual variance. The committee states that the decision is consistent with the strategy for inflation convergence to a level around its target throughout the relevant horizon for monetary policy.
The Copom also states it will remain vigilant, assessing if the strategy of maintaining the Selic rate for a sufficiently long period will be enough to ensure the convergence of inflation
At the September meeting, the Central Bank had already stated that it would remain vigilant, “assessing if the strategy of maintaining the Selic rate for a sufficiently long period will be enough to ensure the convergence of inflation.”
Throughout the cycle, which began in March 2021, the monetary authority raised the Selic rate by 11.75 percentage points, for 12 consecutive times, in the face of a scenario of high and persistent inflation. The Copom will meet again on December 6 and 7.
*By Larissa Garcia, Alex Ribeiro — Rio de Janeiro, São Paulo
This could be largest the French group’s divestment in Brazil
10/27/2022
Cash-and-carry chain Assaí has a market capitalization of R$23 billion — Foto: Leo Martins/Agência O Globo
Casino is likely to sell a stake in the Brazilian cash-and-carry chain Assaí for nearly $500 million. The decision to study such a move was communicated Wednesday to Assaí’s board of directors. Casino is Assaí’s controlling shareholder with a 41% stake valued at R$9.4 billion. Assaí has a market capitalization of R$23 billion.
BTG Pactual, Itaú BBA and J.P. Morgan have been hired to “analyze the terms of the potential transaction,” which would be implemented through a secondary offering to be concluded at the end of November, Assaí said in a note. Casino stresses that no final decision has been made on the potential transaction. But sources told Valor that the group is likely to take this path.
The plan emerges following an increased risk of debt deterioration for the French group on the international market. The move also paves the way to improve the level of governance of the Brazilian chain. According to a source, the company is likely to turn itself into a company without a defined controlling shareholder after Casino’s partial exit, similarly to retailer Renner.
Changes may be made in this sense in the coming months, the source added, involving the appointment of Belmiro Gomes, Assaí’s current CEO, to the board of directors. Mr. Gomes would keep the executive position.
If confirmed, the $500 million deal will be the largest single asset sale made by the French group in Brazil or by one of its subsidiaries, such as GPA (owner of the Pão de Açúcar brand). The amount surpasses that of the sale of Via (owner of Casas Bahia) by GPA, which reached R$2.3 billion in 2019.
The group has had an asset sale plan in place for years to reduce its debt, with a target to reduce the equivalent of €4.5 billion by the end of 2023. However, the assets under negotiation do not yet reach this level.
According to the initial plans of the French company, there was no expectation of a partial sale of their position in Assaí, as Valor reported in September. But a recent worsening of market conditions forced the company to design an alternative path, a source familiar with the matter says.
“Banks have collaterals they can execute if debts come due, so it is the more general situation that is putting pressure,” a source said.
The credit risk measured by Casino’s five-year credit default swaps (CDS) rose to 12,970 basis points, from just 3,977 basis points at the beginning of the month, according to data compiled by Bloomberg.
The initial idea was to maintain the position in Assaí amid the prospect of short-term gains with a seamless business that is well-valued by the market, while seeking renegotiations with other assets, including GPA, in view of an eventual recovery of the valuation of the group, people familiar with the matter say. But this did not happen with GPA at the expected speed after the crisis caused by the pandemic and results still recovering.
After considering divestments in Assaí and Monoprix – another possibility on the table, according to two sources – Assaí would mean more immediate gain.
Another path being analyzed is the splitting of the Colombian group Éxito from GPA, its current controlling shareholder, to pave the way for selling the asset in Colombia. The business has posted high sales growth, but has low liquidity in the market. “But this is also a slower process than a deal with Assaí now,” said one source.
The reduction in Assaí’s stake comes 10 years after Casino became GPA’s largest controlling shareholder. In June 2012, Casino took control of the company, with the subsequent definitive departure of Abilio Diniz from the group after public disagreements with Casino’s chair and CEO Jean-Charles Naouri. The move occurs after the group sold retailer Via in 2019 to Michael Klein and a pool of funds and announced the spin-off of Assaí from GPA in 2020.
Today, investors and analysts believe that the decision to spin off Assaí was right, but that the French group has not been able to expand its retail business in Brazil in such an accelerated way, partly because of crises in 2016 and 2020, but also because of management decisions that did not give expected results in the retail arm, which is now being restructured.
Casino plans to reach March 2023 with debt around €2.5 billion, compared with a gross debt of €7 billion and net debt of €4.5 billion now. Rallye, Casino’s holding company, was placed under protection from creditors in 2019, and since then the group has been restructuring the debts of its operations.
(Ana Luiza de Carvalho contributed to this story.)
Lower inflation is another factor expected to drive results, analysts say
10/26/2022
Brazil’s economic growth is expected to boost the results of companies operating in the domestic market during the third quarter, although the real impact of the stimulus measures in the period is still uncertain. Analysts believe that the retail market aimed at high-income earners will remain resilient, while the doubts lie in the low- and middle-income markets. As for commodities, devalued ore and steel are expected to harm the numbers.
“Overall, what we are seeing is a slightly positive season in both the quarterly and annual comparison for some sectors of the domestic economy, beyond what we previously expected,” said Gabriela Joubert, chief analyst at Inter. She points out that the cooling of inflation and better-than-expected economic activity are expected to boost results.
Most banks estimate GDP growth of 0.5% year-over-year in the third quarter. The services category sustains this growth, benefiting companies. Brazil’s official inflation index IPCA is likely to present a scenario of deflation in important consumer categories between July and September.
Costs, which pressured the results in the second quarter, may fall in the September quarter, analysts say, amid a reduction in fuel prices and the relief in global chains, reducing expenses with freight and basic materials. Pay rises, however, amid the trade unions’ agreements season, may increase personnel expenses.
Aline Cardoso — Foto: Claudio Belli/Valor
“When compared to the second half of the year, companies seem to have managed to pass on costs to consumers in the third quarter, following the improvement in the GDP,” said Aline Cardoso, institutional equity strategist for Brazil at Santander. Among the main highlights are construction, shopping malls, transportation, retail, and healthcare — the latter driven mainly by mergers.
In the group of companies covered by the bank, Santander estimates a year-over-year growth of 16% in revenues and a quarter-over-quarter expansion of 3.7%. Net income is expected to rise 17.8% year-over-year and 22.7% over the April-June period. The bank expects EBITDA to grow 15.4% year-over-year and 11.5% over the second quarter.
XP has similar estimates, expecting revenues to increase 23.2% year-over-year, while profit advances 19.6% in a year and EBITDA rises 24.9%. Considering the market consensus, the digital bank projects that the EBITDA margin will fall by 0.63 percentage points. As for the second quarter, they expect some stability in revenue and EBITDA.
Despite the more positive domestic economic activity, it is still too early to project an improvement in all sectors, said Bruno Lima, a senior equity analyst at BTG Pactual. He believes that when the unemployment rate is lower, consumer and retail assets exposed to a higher ticket will have revenue acceleration.
“We have seen GDP figures improving, but this has been helping specific segments, such as high-income retail,” he said. Mr. Lima says that online retail may still face a challenging quarter, due to the exposure to white goods, such as home appliances, which have high prices. The effects of the cash-transfer program Auxílio Brasil on consumption may be felt in the final three months of the year.
The result of the cash-and-carry chain Assaí in the third quarter, released last week, gives clues as to how the food retail may behave, especially the one aimed at low-income. The cost-benefit appeal of Brazilian stores is the main highlight of the segment, indicates Goldman Sachs.
Assaí reported revenues of R$13.8 billion, up 27.5% year-over-year. Same-store sales grew by 9%. The result came 2.4 percentage points above GPA Brasil in the same indicator, when compared to the latter’s sales report in the third quarter.
“Food retail has this resilience because it is basic consumption and this creates a very strong capacity to pass on prices, maintaining margins,” said Ms. Joubert. Apparel retail should have mixed results, with the weaker winter hurting sales for the season, partially mitigated by the resumption of face-to-face activities, and increasing demand for clothing.
Companies dealing in metal commodities are likely to be the negative highlight of the earnings season, with iron ore falling 36% year-over-year in the third quarter. Oil is still up 32% year-over-year, but down 13% quarter-over-quarter. The pulp and paper industry, on the other hand, appears among the positive highlights, given the resilient pulp price, above $800 a tonne.
Doubts about global demand for ore and oil, with concerns about recession, affect the numbers. “Especially in the mining sector, revenues are expected to be impacted by lower prices, as sales are still weak, despite volumes improving,” points out Inter’s chief analyst. The margins of mining companies are likely to suffer with this scenario, in addition to a delay in the cooling of costs, which is natural for the sector.
For the fourth quarter, China’s activity is on the radar, indicates the BTG analyst. The country, which imports more than 60% of Brazilian ore, has been showing lower-than-expected growth. The Brazilian Institute of Economics of Fundação Getulio Vargas (Ibre) expects Chinese GDP to stand at 3.4% in 2022, well below the government’s target of 5.5%.
“In oil and gas, we expect a strong production, with the barrel around $100, which may leave the companies’ revenues at healthy levels,” said Gabriel Barra, an analyst at Citi. The drop in fuel prices, however, is expected to affect the results of the companies in the sector, generating losses with inventories and compression in margins.
The power sector, which in the third quarter of 2021 suffered from the prolonged drought, this year is likely to have better results. In Credit Suisse’s view, generation is expected to see costs fall with the reduction of hydrological risk, while distribution may see mixed results and transmission will be helped by contractual hikes.
Shopping mall management company may add R$2bn in revenues
10/26/2022
While awaiting regulatory approvals for the merger with BR Malls, shopping mall management company Alliances Sonae is accelerating other projects. Owner of extensive areas around some of its 27 malls, the company has defined a strategic plan for the 4.4 million square meters of its own land portfolio.
Aliansce segregated the future expansion area from the malls and decided that 2.3 million square meters will be used in multi-use real estate projects — corporate buildings, residential, hotels, hospitals, and schools.
The company is already implementing six of the so-called mini neighborhoods, which total 35 towers and are expected to be completed in four years. With a total potential sales value of R$1.8 billion, those initial projects have less than 300,000 square meters — so there are more than 2 million square meters still to be planned.
Mario Oliveira — Foto: Divulgação
As the company had to install water, sewage, and power services in many of the lots, it is based on those facilities that the company makes the surrounding area feasible. “In Maceió, we closed a deal with healthcare company Unimed to build a hospital and, incredible as it may seem, it was one of the few plots of land in the city with water and sewage,” said Mario Oliveira, the Portuguese from Porto who is director of new business and M&A at Aliansce Sonae.
“The vision of the masterplan is sustainable: it’s to be a mini neighborhood where you can do everything using the car as little as possible. You can go by bike or on foot from home or hotel to work, to the mall, to class,” he added.
Eight projects are under construction, including a hospital and six residential towers in Maceió, as well as a hotel in Uberlândia (Minas Gerais). Besides the launching of three residential towers in Goiânia, the city hall is approving the project for 14 buildings at Via Parque Shopping, in Barra da Tijuca, Rio de Janeiro.
According to the executive, Aliansce’s investment in these launches is “virtually zero,” since the company has already invested in the infrastructure of the areas at the time of construction of the malls and the new buildings are the responsibility of the developer partners.
The company has cut different deals according to each project. In the case of Unimed, Aliansce sold the land to the doctors’ cooperative, but it has done barter with developers in the buildings, in which it establishes a minimum payment and has an upside according to the total effective sales price.
“We profit on the financial side since the real estate development is on land that is not being used today and, therefore, does not generate any remuneration for the company. We also gain public in our primary mall area,” said Mr. Oliveira.
In Salvador, for example, with 2,600 residential units and an estimated 2,500 people in the corporate buildings, the estimate is of a monthly impact of 60,000 people in the mall, given the recurrence of this customer — for shopping or for a cup of coffee.
“Today the financial market assigns zero value to this in our share, a financial contribution that will appear with time on the financial statement,” the executive said. Aliansce is currently worth R$5.55 billion on the stock exchange — BR Malls, with which it will merge, has a market capitalization of R$8.18 billion.
Digital bank, which acquired Easynvst in September 2020, now has 6 million clients
10/26/2022
Fernando Miranda — Foto: Silvia Zamboni/Valor
A little over a year after Nubank’s acquisition of Easynvest was approved, the lender’s assets under custody exceed R$100 billion. Of this amount, R$40 billion are effectively in investments and R$56 billion in Nu Conta, the system that automatically remunerates account holders through bank deposit receipts (RDB).
When it closed the sale to Nubank in September 2020, Easynvest had R$24.5 billion under custody from a customer base of over 1 million. Today, there are more than 6 million, said Fernando Miranda, Nubank’s chief investment officer, who was previously Easynvest’s chief executive.
The deal cost Nubank, a digital bank known for its purple cards, R$2.3 billion and was the shortcut to enter the world of investments. After this step, the mass grew with an IPO in which 815,000 retail customers won or invested in the lender’s Brazilian Depositary Receipts (BDRs) traded in New York at the end of last year.
There is room for more, Mr. Miranda told Valor, considering that Nubank already has 70 million clients. “I see growth on two fronts: firstly, we must increase the market share among clients who already invest in stocks and CDB through cross-selling and by grabbing a larger share of their portfolios from competitors. Another front is the millions of non-investors that can start investing. There is that famous R$1 trillion in retail as a whole, but a big chunk of that is still out of the market.”
One bet to jump a few steps in investments was to make things simpler for individuals by eliminating jargons and splitting their money according to their plans for finances, from building a financial reserve to longer-term goals, such as buying a car or plan a dream trip. “We have developed many tools for investors to take this almost like a recurring debt. They outline the dream, the goal, and I show the monthly [evolution] to achieve it. These are engagement mechanisms that change the behavior of the investor.”
This type of approach that borrows from behavioral finance by stimulating savings became available to the entire base in August. Since then, 2.8 million people created at least 4 million savings “boxes.” Financial reserve accounts for 52% of the plans made. This money yields 100% of the interbank benchmark rate, known as CDI, in an RDB or low-risk fixed-income fund. “The big change is that you invert the thing. It doesn’t matter so much the specific asset. The most important thing is the dream, the goal.”
It has worked with the use of technology. A survey conducted by Nubank with 7,500 customers this month showed that 54% had saved money or invested for the first time with the lender.
Investment services for mass retail have been integrated into the digital bank’s application, while Easynvest’s infrastructure continues in parallel, now as NuInvest. Instead of building from scratch the backoffice and the connection with B3 and other market players, Nubank took shortcuts with the deal. “We bring what we have in NuInvest to Nubank’s app with adjustments for Nubank’s scalability,” said Mr. Miranda. “I had no dimension of dynamism until the acquisition. When we see Nubank’s numbers, with 70 million customers, the scalability discussion changes levels.”
He gives an example of this. The proprietary funds accounted for 8,000 to 9,000 transactions per day eight months ago. Today, that figure is around 30,000.
In the migration of products to Nubank’s app, the part related to the stock market is fully integrated, with stocks, BDRs and real estate funds. Access to Tesouro Direto, a system for buying and selling government bonds, which was the gateway for new investors at Easynvest, is not yet available. In the September sample, with data from July, NuInvest appeared in second position in number of transactions, behind only XP. Mr. Miranda estimates it has a 20% market share. The Treasury disclosed Tuesday the net issuance of R$1.19 billion in bonds for the program, with the stock at R$99.9 billion.
Considering own and third-party funds, Nubank’s asset management company has 1 million shareholders with about R$1 billion in assets, which emphasizes the low average ticket of the operation. The firm has invested in proprietary products with names such as Nu Reserva Imediata, Nu Reserva Planejada, Nu Cautela, and the Ultravioleta family, for bolder clients, which includes a stock portfolio and a hedge fund. These two portfolios are under the structure of a fund of funds that buys quotas from asset management companies like Verde, Constellation, Bogari, SPX, and Absoluto, taking investments starting at R$100.
Mr. Miranda said that the funds collection is wide enough and, unlike its competitors, does not intend to have 100, 200 portfolios in the platform.
Despite using artificial intelligence based on clients’ objectives, Nubank’s decision was to discontinue the services of Vérios and its robo-advisor Ueslei. The digital asset management business was acquired by Easynvest in January last year and brought in about R$400 million from investors who were already making their transactions through the platform. “We discontinued the brand, but brought in all the machine learning technology and robo-advisor algorithms to add value to the asset and portfolio management models,” said Mr. Miranda.
In order to serve high-income clients, either because they amass more money during the relationship or by bringing those who like the digital universe, Mr. Miranda said there is already a team of specialists aimed at premium investors, with portfolios starting at R$150,000. They work “differently from what is done in the market, without conflicts of interest or sales targets.”
This is an unprecedented move in the trajectory started by Easynvest in the past, since it migrated the old brokerage Título to a fully digital investment platform. It is something that is being tested to understand the needs of clients with this profile. Mr. Miranda says he is not spending much energy on this – this is something for the future. But the strategy matches with the development of the capital markets activity, which began in January. This year, Nu Invest has coordinated R$1.5 billion in operations with debt issuers such as Burger King, Raízen, B3 and Alupar. It is in the wealthier segments of the population where it finds the greatest interest for this type of asset.
French oil company has acquired one third of Casa dos Ventos, one of the biggest deals in the industry this year
10/26/2022
Casa dos Ventos, whose pipeline includes up to 20 GW in wind and solar projects, was founded in 2007 — Foto: Divulgação
French oil company TotalEnergies has acquired a 34% stake in the generation arm of Casa dos Ventos, one of Brazil’s main wind project companies, sources familiar with the matter say. The deal, which is about to be announced, would be valued at R$4.2 billion, including cash and debt. The new joint venture is expected to increase the investment potential of both companies in renewable power.
The deal, considered one of the biggest in the power industry this year, involves a portfolio of wind and solar farms totaling 6.2 gigawatts of installed capacity, including 1.7 GW of plants in operation or under construction and 4.5 GW of projects in development or in the pipeline.
Of the total, 700 megawatts are already in commercial operation and 1 GW is under construction, with entry into operation between 2023 and 2024. Of the 4.5 GW under development, 1.5 GW are expected to start operation by 2025, while 3 GW would be online between 2026 and 2027. Casa dos Ventos and TotalEnergies declined to comment.
TotalEnergies plans to invest in renewable power as part of its energy transition, with a goal of having 17 GW in commercial operation by 2030 and achieving the goal of being carbon neutral by 2050. The oil company has created a renewable generation arm, TotalEren, and filed with the federal environmental agency Ibama for permits for three offshore wind farms with total installed capacity of 9 GW.
In addition to renewable generation, TotalEnergies’s goal is to increase the share of natural gas to 50% in the company’s mix by 2030. The proportion of oil has fallen to 55% in 2019 from 66% in 2015 and is expected to remain at 30% in 2030.
Casa dos Ventos, whose pipeline includes up to 20 GW in wind and solar projects, was founded in 2007 and is controlled by businessman Mário Araripe as a developer of projects that were sold to companies interested in the new market that was being shaped. About a quarter of the renewable projects in operation started in the company. Between 2013 and 2014, the company sold 1 GW in power auctions, divided into five wind farms. The farms were sold to Cubico (a company formed by assets that belonged to Santander), Actis (which was later renamed to Echoenergia and sold in October 2021 to Equatorial Energia) and a company controlled by Votorantim and Canada Pension Plan (CPP) – which was renamed Auren Energia after acquiring Cesp.
In 2015, the company started developing solar photovoltaic projects, including hybrid versions that use areas of the company’s wind farms as a way to reduce transmission costs. Starting in 2018, Casa dos Ventos began structuring projects for sale on the free market, with Vulcabrás and Baterias Moura among its clients.
The purchase turns TotalEnergies into a relevant player in the segment, especially by having wind farms located in the Northeast, the region in Brazil with the best wind potential. Likewise, the operation gives Casa dos Ventos enough funds to build new wind and solar farms from its portfolio as renewable generation is seen as propping up green hydrogen projects.
At the same time, the Brazilian Development Bank (BNDES) approved financing of R$690 million for four wind farms Casa dos Ventos will build in Bahia (Ventos de São Januário 16, 17, 18, and 19).
The four farms have a total installed capacity of 288 MW. The funds will be used for the acquisition of domestic wind turbines, civil works, and technical services, BNDES said.
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