Negotiations are in early stages, with assets valued at R$1.6bn to R$1.8bn
02/03/2025
Portuguese energy group EDP has put two major solar farms in São Paulo State up for sale, according to sources consulted by Valor. Negotiations are still in the early stages, and the assets are valued by the market at between R$1.6 billion and R$1.8 billion, based on their enterprise value—which includes both equity and net debt. BTG Pactual is advising on the transaction.
The assets on the market include the 252-megawatt Pereira Barreto Solar Complex, located in the municipality of the same name, and the 254.6 MW Novo Oriente Solar Complex, in Ilha Solteira.
EDP’s divestment strategy extends beyond solar power. The company is also negotiating the sale of the Santo Antônio do Jari (392.95 MW) and Cachoeira Caldeirão (219 MW) hydroelectric plants in Amapá, as previously reported by Valor. Bradesco BBI has been hired as a financial advisor for that transaction, which could generate around R$3 billion, according to market sources. Talks on these hydro assets are already at an advanced stage and could be finalized in the coming weeks.
When contacted, EDP declined to comment on the asset sales. BTG Pactual also did not provide a statement.
Market analysts caution that the sale of EDP’s solar assets could face hurdles in 2025. The growing use of curtailment—restrictions on wind and solar generation imposed by Brazil’s National Electric System Operator (ONS)—is increasing risk perceptions around renewable energy investments.
These regulatory constraints have already affected the market value of energy companies and made it more difficult for them to secure financing, according to banks and financial institutions.
The Pereira Barreto project received a R$750 million investment, while Novo Oriente was financed with R$805 million from the Brazilian Development Bank (BNDES), allocated to six special purpose entities under EDP. Given that these are standalone assets, potential buyers are likely to be either strategic investors or financial players with existing energy platforms.
Pereira Barreto was inaugurated in 2021 by EDP Renováveis, the renewable energy arm of the Portuguese group. Novo Oriente, in contrast, was developed through a 50/50 partnership between EDP Brasil and EDP Renováveis.
Mergers and acquisitions in Brazil’s solar energy sector surged 76% in 2024 compared to the previous year, according to consulting firm Greener. Despite tighter profit margins, the expectation is that M&A activity in the energy sector will remain strong in 2025.
In late December, João Marques da Cruz, EDP’s president for South America, stated that the company does not plan to invest in new power generation projects in the coming years, citing weak demand and low electricity prices. Instead, EDP will focus its investments in Brazil on electricity distribution and transmission, with planned spending of up to R$12 billion in these areas through 2030.
EDP has consistently communicated to investors that it follows an asset rotation strategy, selling projects to finance new investments. The company’s financial leverage, measured by net financial debt to EBITDA over the 12 months through September 30, 2024 (the latest available data), stood at 2.12 times, according to Valor Data.
EDP has already executed several major asset sales in Brazil. In late 2021, British fund Victory Hills and Paraty Energia acquired the Mascarenhas power plant from EDP for R$1.23 billion. In 2023, the company sold transmission lines to private equity firm Actis in a R$2.7 billion deal. Additionally, EDP agreed to sell an 80% stake in its coal-fired Pecém plant in Ceará to a group of Brazilian investors led by Mercurio Asset.
If the company successfully completes its latest divestments, the proceeds could help finance its transmission investments. In March 2024, EDP secured three lots in a transmission auction held by Brazil’s electricity regulator, ANEEL. The projects require an estimated R$3 billion in capital expenditures to build nearly 1,400 kilometers of transmission lines and two substations across four states.
*By Robson Rodrigues e Fernanda Guimarães — São Paulo
Macroeconomic outlook for 2025 signals slowdown in loans and rising default rates
02/03/2025
The earnings season for Brazil’s major banks in the fourth quarter of 2024 is expected to reflect what analysts are calling “the last rays of sunset.” In other words, the numbers from October to December are likely to be positive, with rising profits and loan portfolios, while default rates remain stable. However, the forecasts presented by financial institutions and what their top executives say about 2025 in earnings calls are more important than the results themselves. With the Selic policy interest rate remaining high, credit is expected to lose momentum in 2025, and concerns over the country’s fiscal outlook loom large.
Together, Itaú Unibanco, Bradesco, Banco do Brasil, and Santander are expected to report combined profits of R$29.363 billion in the fourth quarter, up 1% from the previous quarter and 22.7% higher than the same period in 2023, according to the average projections of ten financial firms surveyed by Valor. For the year 2024, total profit is projected at R$112.4 billion, an increase of 16%.
In a report titled The Last Rays of Sunset, Itaú BBA noted that despite strong fourth-quarter results, a key factor will be the banks’ outlook for the year ahead. According to analysts, the combined profit of the four largest banks is still expected to rise around 10% in 2025 but growth will likely be concentrated in the first half of the year, making full-year guidance a challenge.
“Providing guidance is a tough task given the increasingly volatile and deteriorating scenario. Worsening macroeconomic indicators, such as interest rates and inflation, are raising barriers to credit, which tends to curb demand for new loans. We expect these concerns to be reflected in executives’ statements and guidance, with a forecast of moderate loan portfolio growth (below 10%) and stable financial margins,” Itaú BBA stated.
Bradesco BBI also highlighted that investor focus will be on 2025 guidance and pointed to the adoption of the new IFRS 9 accounting standard, which could impact banks’ bad debt provision levels. “Notably, we believe banks will factor in a more challenging macroeconomic scenario for 2025, which may result in slower loan portfolio growth. Additionally, as banks deal with the expected impact of IFRS 9, some may face higher provisioning requirements in 2025.”
Bank of America projects that the major banks’ loan portfolios will grow by 9% this year but net interest income should expand at a faster pace, driven by client margins—supported by higher interest rates—though partially offset by lower market margins. “We also expect asset quality to deteriorate and risk costs to increase. Finally, we believe fee revenue will rise in line with operational expense growth,” BofA analysts stated in a report.
Bernardo Guttmann, head of financial sector analysis at XP, pointed out that a snapshot of credit data published by the Central Bank for December does not indicate any slowdown in lending. However, he noted that recent conversations with bank executives suggest a more cautious stance. “It has become clear that banks’ sentiment regarding the economy is aligning more with that of financial markets, which have a more pessimistic outlook,” he said.
Mr. Guttmann added that no specific sector stands out as the most likely to increase default rates, except for agribusiness, where court-supervised reorganization cases are expected to peak between February and March.
XP also noted that IFRS 9 will lead to a raft of reclassifications beyond provisioning adjustments. Items previously recorded as fee income—such as real estate appraisal fees for mortgage applications—will now be accounted for as part of financial margins. Conversely, some expenses that were previously recorded as administrative costs, such as debt collection fees, will now be entered into bad debt provisions. Additionally, commissions paid to correspondent banking networks, which were previously paid upfront, will now be amortized over the contract term. “This will alter some balance sheet line items and complicate comparisons with previous periods,” said analyst Matheus Guimarães.
Another factor that could impact fourth-quarter results, particularly for some mid-sized banks, is payroll-deductible loans for Social Security (INSS) beneficiaries. Banks such as Banco do Brasil, Itaú, Santander, Pan, BMG, Mercantil, and Banrisul suspended these loans through correspondent banking networks late last year due to high operational costs relative to the 1.66% monthly interest rate cap.
In January, the National Social Security Council (CNPS) raised the cap to 1.80%, a level banks argue is still insufficient. The Brazilian Association of Banks (ABBC) has taken the matter to the Federal Supreme Court (STF), questioning whether the CNPS and the National Institute of Social Security (INSS), which are linked to the Ministry of Social Security, have the authority to set interest rate caps.
Analysts project that Itaú will post a record quarterly profit of R$10.831 billion. The bank is also expected to announce an extraordinary dividend payout of nearly R$20 billion.
According to analysts at Genial, Itaú’s highlights for the period should include loan portfolio expansion—continuing the pace of previous quarters and closing with 12.5% growth, at the top of its guidance range—higher financial margins, albeit at a slower rate than loan growth, and controlled provisioning expenses, reflecting stable asset quality and default rates. “It is the leader of the pack, with a return on equity (ROE) of 23% in 2025,” Genial analysts said.
Banco do Brasil is the only major bank expected to report a slight quarterly profit decline (-0.2%). Citi analysts believe its financial margin should remain resilient but do not foresee a turnaround in the agribusiness segment’s difficulties. “We expect loan portfolio growth of 11% in 2024, with persistent provisioning pressures slightly offset by strong treasury results. Agribusiness loan defaults should remain high compared to historical levels, although client margins should continue to rise steadily.”
Bradesco is expected to continue its turnaround trajectory, with profit surging 84.5% from the fourth quarter of 2023 when higher provisions and a leadership transition impacted the bank’s earnings (Marcelo Noronha replaced Octavio de Lazari Jr. as CEO). According to Santander analysts, client margins should improve and asset quality should remain stable, while market margins could be a downside risk. They estimate this line will total R$312 million in the fourth quarter “due to high volatility in the yield curve and a lack of hedging instruments to mitigate this impact.” Given the Selic outlook for 2025, some analysts are already forecasting a zero result for Bradesco’s market margin this year.
Santander is expected to report a R$3.702 billion profit, with financial margins growing in line with loan portfolio expansion and fee revenue standing out amid the bank’s efforts to engage customers and boost cross-selling. “Meanwhile, we expect operating expenses to grow at a similar pace to the third quarter but below inflation on an annual basis. We also anticipate the effective tax rate will continue rising to 16%, though likely still below sustainable levels,” Goldman Sachs stated.
Nubank, which is not included in Valor’s aggregate results, is expected to report a profit of approximately $565 million (around R$3.2 billion based on Friday’s exchange rate). Analysts believe the bank may be affected by currency fluctuations, and fourth-quarter figures will be a key indicator of the fintech’s risk appetite amid a tougher macroeconomic scenario. “We see 2025 as a challenging year for Nubank. Unsecured loans in Brazil may slow if credit conditions worsen due to inflation and higher interest rates, along with rising default rates. Although Nubank is gaining market share in secured lending, we believe returns on these products remain unattractive,” Citi analysts stated.
Increase of 8.9% in revenue aids performance; secretary highlights challenges for 2025
01/31/2025
The Brazilian federal government met its primary budget target for last year, thanks to both increased revenue collection and reduced expenditures. However, National Treasury Secretary Rogério Ceron emphasized the necessity for the federal government to improve the primary balance by 2025. He also noted that recent changes in both external and domestic scenarios might “require more effort on our part” to balance public finances.
The central government ended last year with a primary deficit of R$44 billion, equivalent to 0.36% of GDP, according to the National Treasury Secretariat (STN). Excluding expenditures not considered in the target calculation, such as spending to combat the effects of floods in Rio Grande do Sul, the deficit was R$11 billion, or 0.09% of GDP. The target for 2024 was a zero deficit, with a tolerance range of 0.25 percentage points of GDP, either above or below, or approximately R$28.8 billion.
Earlier this month, Finance Minister Fernando Haddad stated that the central government would meet the target, forecasting a deficit of about 0.1% of GDP. This Friday (31), the consolidated public sector results calculated by the Central Bank, covering the federal government, states, municipalities, and non-financial state-owned enterprises, except Petrobras and Eletrobras, will be released.
The Central Bank figures are also expected to confirm that the nominal deficit remains at a concerning level, around 8% of GDP, ranking among the highest globally. Unlike the primary result, this figure includes interest payments on public debt and is closely monitored by analysts as it determines the country’s debt dynamics. For this year, the nominal deficit is expected to range between 8.5% and 9% of GDP.
According to Thursday’s Treasury data, the 2024 outcome was influenced by a real growth of 8.9% in net revenue. This increase was driven by both tax collections managed by the Revenue Service, which rose by 12.5%, and non-managed collections, which grew by 3.6%. In the latter case, revenues from participations and dividends, particularly those from the National Bank for Economic and Social Development (BNDES), which paid R$18.7 billion more than the previous year, played a significant role.
On the expenditure side, there was a 0.7% decline, mainly due to a R$39.8 billion reduction in spending on judicial rulings and writs of payment. However, mandatory expenses such as the Continuous Cash Benefit (BPC) and flow control continued to rise, with increases of R$14.7 billion and R$16.4 billion, respectively.
In a press conference detailing the figures, Mr. Ceron highlighted that the 2024 primary result was the second-best of the last decade, stating that “it is undeniable that the [fiscal] recovery process has been intense” over the past two years.
“The first year of the fiscal framework was extremely satisfactory,” he remarked, referring to 2024.
However, he acknowledged that “we need to improve” compared to last year, indicating that a reduction from the 0.36% deficit recorded in 2024 would signify improvement. The target for this year also aims for a zero deficit, with a tolerance of 0.25 percentage points.
Mr. Ceron also mentioned that given recent changes in the economic landscape, it might be necessary to reopen “the debate” on new measures to adjust public accounts. On the international front, he cited the Federal Reserve’s decision to “pause monetary easing.” On Wednesday (29), the Fed maintained the federal funds rate at a range of 4.25% to 4.5% annually.
The Treasury Secretary also identified Brazil’s interest rate as a source of fiscal pressure. Since mid-December, the Central Bank has raised the Selic rate by 200 basis points to 13.25% per year and signaled another one-point increase for the March meeting. According to Mr. Ceron, these changes suggest that “fiscal challenges may be intensified.”
Mr. Ceron also addressed President Luiz Inácio Lula da Silva’s statement that he would only implement new fiscal measures if necessary. According to the secretary, this was a “positive signal” confirming that the government will do what is required to achieve fiscal balance, while also reflecting “a legitimate concern [of the president] to preserve public policies” for the most vulnerable population.
The secretary dismissed the possibility of the Brazilian economy being in a fiscal dominance scenario, which occurs when public debt is so high that interest rate hikes could have the opposite effect on inflation, further pressuring price trajectories.
Nonetheless, Mr. Ceron stated, “we need to collaborate” to limit the Selic rate hike cycle. “The sooner we can provide correct signals, the shorter the cycle will be,” he added.
*By Estevão Taiar, Guilherme Pimenta e Ruan Amorim — Brasília
In January, the gap between sales growth in value and volume widens; diesel price hike still ahead
01/31/2025
Inflation is forcing Brazilians to further revise their shopping baskets, already impacting the pace of sales volume growth in stores in 2025, according to an exclusive NielsenIQ (NIQ) report obtained by Valor.
The expansion rate of units sold in January, compared to the same period in 2024, dropped to 2.4% from 11.2% over roughly 20 days, from the first to the third week of the month.
Another exclusive study by Scanntech shows that over the past six months, half of the volume growth seen in early 2024 has been erased. This means inflation has already forced Brazilians to give back part of the gains achieved just months earlier.
Amid weakening consumption, the Northeast states—where the government’s key voter base is concentrated—are the only region among those analyzed where supermarket and hypermarket sales are declining simultaneously. Only cash-and-carry stores posted growth in the third week of January compared to the previous year, according to NIQ.
For the past two weeks, this trend has been raising concerns in the government, which is seeking short-term measures to slow price increases. The negative impact of inflation on President Lula’s popularity, as highlighted by a Quaest poll on Monday (27), is a key concern. On Tuesday, Mr. Lula publicly addressed rising prices.
The surveys have yet to account for the impact of Petrobras’s recent diesel price hike, which is expected to drive up food transportation costs in a country where distribution relies heavily on highways, further pushing prices upward.
According to NIQ’s weekly tracking, based on sales data from partner retail chains, the total units sold slowed at a faster pace than revenue growth in the first three weeks of January—a typical sign of accelerating shelf inflation.
In the first week of the month, revenue was up 20.4%, while unit sales increased 11.2% year-over-year. By the second week ending January 12, volume growth slowed to 9.9%, while revenue expanded by 16.4%.
Over the following seven days, until January 19, the trend shifted further: revenue rose 9.4%, but the number of units sold increased by only 2.4%—just a quarter of the previous week’s pace and far below the nearly 20% growth seen at the start of January.
For the CEO of a wholesale retailer, this modest 2% growth represents the “new normal” for sales volume in an environment of repeated price hikes.
“What we saw at the beginning of January, with double-digit growth, was an anomaly. There was a strong replenishment purchase because the year started in the middle of the week, which typically boosts restocking sales,” he said. “I think we’ll see more of this 2%-2.5% growth throughout the year, and that’s weak.”
This slowdown occurred just before President Lula warned his ministers in a January 21 meeting that workers were feeling the pinch of rising prices and urged swift action.
“We’ve seen supermarkets trying to plan purchases further in advance with suppliers to keep inventory levels as low as possible [to reduce fixed costs]. This has been happening since October. There’s also been a push for greater brand variety to balance price increases,” said Marcio Milan, vice president of ABRAS, the retail food association.
Mr. Milan estimates that prices in stores rose about 1% in January alone. The association is in ongoing negotiations with the government to find ways to curb accelerating prices, though there is skepticism within the sector about the effectiveness of such measures.
Gabriel Fagundes, director of industry insights at NIQ, said while the first two weeks of January were positive, the subsequent slowdown was driven by price hikes linked to the rising dollar. Many raw materials and agricultural commodities are priced in the U.S. currency.
New price lists began arriving in stores between December and January. “The data shows a widening gap between value growth and units sold, which is driven by price increases,” Mr. Fagundes noted.
Price gap
Between November and December—the holiday shopping and Black Friday period—average revenue in retail, wholesale, and pharmacies grew 6.3%, while unit volume increased just 1.2% year-over-year, according to Valor’s calculations based on monthly data.
Thus, as Mr. Fagundes pointed out, there was a roughly 5-percentage-point gap between the figures, reflecting inflation and shifts in product mix. This gap has widened further in 2025.
By January 19, the accumulated gap had reached 7.5 percentage points—sales in value terms grew 15.5%, while unit volume increased only 8%. “We need to see how much wider this gap will get. If it keeps growing, it could signal additional price hikes ahead. February brings increased demand for beverages and personal care items [due to Carnival], which are also sensitive to dollar fluctuations,” Mr. Fagundes said.
The wholesale CEO noted a positive development: the recent drop in the dollar’s exchange rate, which he believes could ease pressure for further price hikes in the industry.
Mr. Fagundes emphasized that more data is needed to determine volume trends for early 2025 but confirmed that price increases are becoming more widespread. He noted that the latest hikes are compounding existing inflationary pressures from late 2023.
Economists had previously warned that household budgets were being squeezed by persistently high price levels in 2024. Now, additional increases on top of those levels are evident, depending on the product category.
NIQ’s survey covers the so-called modern retail segment, which includes supermarkets, hypermarkets, cash-and-carry stores, and pharmacies—accounting for 80% of national consumption. It does not include smaller independent retailers, which make up the remaining 20% and typically do not influence broader market trends.
Consumer behaviour
The food retail and pharmacy sectors generate R$1.6 trillion annually, representing just over 60% of the country’s total restricted retail sales.
This inflationary acceleration is partly due to agricultural crop failures, climate issues, and new waves of price hikes across various product categories, including dollar-linked raw materials.
Between late October and early January, the exchange rate per U.S. dollar rose 7.3%. Since then, it has fallen 5.6%. The exchange rate surpassed R$6.20 on January 2, following a loss of government credibility after announcing insufficient fiscal adjustment measures to restore public finance order.
Since November, retailers and food, hygiene, beauty, and cleaning product manufacturers have been negotiating price adjustments of 5% to 10%, depending on the category, as previously reported by Valor.
According to Scanntech’s internal data analysis, currency-sensitive supermarket items accounted for 76% of total food retail price increases in the fourth quarter of 2024.
Another key finding is how consumers are responding at points of sale.
The Northeast states were the only region among the seven analyzed by NIQ in January where supermarket and hypermarket sales declined simultaneously. Hypermarket sales fell 16% from January 13-19 compared to the previous year.
Only cash-and-carry stores grew during this period in the region (9.2%), offering prices 5%-10% lower than other retailers.
Scanntech Brasil’s data, based on transactions from 45,000 partner stores, indicates that Brazil has reversed recent consumption gains. In the fourth quarter, sales volume fell 0.7%, following a 1.2% decline in the third quarter. This contrasts with the first and second quarters, when volume grew 3% and 1%, respectively.
This outlook echoes past downturns, though not as severe as in 2015-2016 during the Dilma Rousseff administration, when industries and retailers lost years of growth due to declining sales and revenue.
Priscila Ariani, marketing director at Scanntech Brasil, estimates that, in the fourth quarter of 2024, Brazilians saw a 5.7% decline in purchasing power, driven by a 9.3% increase in average food retail prices, while average income rose by just 3.1% for the year. “With price pressures persisting into January, purchasing power is expected to take an even greater hit,” she said.
“Shrinkflation”
Ms. Ariani highlighted another trend: consumers shopped more frequently in 2024 but bought less per trip to hunt for deals.
Calculations show that from January to December 2024, food retail sales in value terms increased by 5.2% compared to 2023, driven primarily by a 4.7% rise in prices over the year. The remaining 0.5% of growth came from a higher sales volume.
In other words, over 90% of the revenue expansion resulted from price adjustments on store shelves. As for units sold, the modest 0.5% increase was supported by a 2.3% rise in in-store traffic, which contributed to the overall index.
She also pointed to “shrinkflation,” where manufacturers reduce package sizes while maintaining prices, embedding an often unnoticed inflationary effect that impacts consumers’ wallets.
In 2024, the average product package size shrank by 0.9% compared to 2023, while consumers increasingly opted for smaller, lower-weight products to cut costs.
“This 0.9% reduction may seem minor, but in a market that moves tonnes of goods annually and generates nearly R$1.4 trillion in food sales, it is far from insignificant,” Ms. Ariani explained.
A leading wholesale club in São Paulo reports that packaging downsizing has already led to a 3% decline in the volume sold in 2024.
“If you factor in the reduction in product quantities per package and subtract it from the overall volume increase for the year, the total tonnage sold in Brazil is actually lower than reported,” a source said.
According to the Scanntech Brasil’s study, around 83% of grocery product categories saw packaging sizes shrink by late 2024, leading to a 4.5% drop in volume sold.
Ms. Ariani highlighted that this trend impacts business predictability and planning, affecting investment decisions throughout the year—an issue also flagged in analyst reports. Since the pandemic, rising interest rates and inflation-driven cost pressures have led some retail chains to scale back expansion plans and new store openings.
This article was translated from Valor Econômico using an artificial intellig
Number of convictions increases, but challenges in effectively punishing crises persist, survey finds
01/31/2025
A study recently released by the Amazon Institute of Man and Environment (Imazon) reveals that only 5% of convictions for illegal deforestation in the Amazon result in compensation payments. Furthermore, the processes have not guaranteed that the fines collected are used for the restoration of the biome.
Upon reviewing 3,551 public interest civil actions (ACPs) filed by Federal Prosecution Service (MPF) between 2017 and 2020 due to illegal deforestation in the Amazon, Imazon found that the number of convictions has increased, but effectively punishing environmental crimes remains challenging.
According to the research, out of 640 judgments upheld after appeals and 55 consent decrees (TACs) established, which determined compensation of R$252 million, only 37, or 5%, had their compensation paid.
Imazon reported that the debts paid amount to R$652,300, covering three judgments and 34 agreements. Considering cases in the payment phase, with bank account freezes of the defendants or installment payments, the percentage increases to only 8%.
The study further indicates a tendency among judges to reduce the amounts requested by the Federal Prosecution Service. In cases where initial and final values were available, there was a 34% reduction in compensations for material damages—averaging from R$11,304 to R$7,515 per hectare deforested—and a 59% reduction for collective moral damages—from R$5,616 to R$2,280 per hectare deforested.
“Making criminals pay for illegal deforestation in the Amazon and repairing the damage is one of the main challenges for environmental justice,” Imazon lamented in a statement.
On the other hand, the institute considers it a positive finding that convictions have increased since 2017, following the launch of the Amazon Protect Program, a project by the MPF to combat illegal deforestation in the region. Nevertheless, the data still show that convictions are a minority among all such cases.
By December 2023, out of 3,500 actions, approximately 2,000, or 57% of the total, had received a judgment, with 695 cases resulting in some form of accountability. These included 640 cases judged to be procedurally valid and 55 consent decrees, which are commitments by those responsible for illegal deforestation to undertake remedial actions.
This analysis indicated an increase in accountability, as another Imazon survey found that, of the 3,500 cases analyzed, only 650 (18%) had judgments by October 2020, with 51 being procedurally valid.
“That is, the convictions accounted for 1% of total actions and 8% of the judgments. Most decisions holding deforesters accountable [449 cases] occurred after October 2020, especially in 2023, when there were 241 valid judgments,” the Imazon report explained, emphasizing that both the Federal Regional Court of the 1st Region (TRF1) and the Superior Court of Justice (STJ) have been more favorable to the accountability requests of the MPF.
“It is positive to see the increase in procedurally valid cases for holding deforesters accountable and that the courts have upheld a favorable understanding of convictions in these cases that use evidence obtained remotely, such as satellite images and database use. The challenge now is to achieve effective payment of compensations and the recovery of deforested areas,” said Imazon researcher Brenda Brito.
However, the study also shows that 66% of the judgments were unfavorable to the preservation of the biome even after appeals. By December 2023, 860, or 42% of the cases, had been dismissed—indicating the courts determined there was no evidence for action. Additionally, 268 actions, or 13%, were deemed unfounded—meaning all MPF requests were denied. Furthermore, 137 (7% of the total) were declined by the state judiciary. Another 68 actions, representing 3% of the total, were annulled, meaning they became invalidated decisions awaiting new judgments.
According to Imazon, the predominance of case dismissals occurred mainly until 2020 and was due to actions with uncertain defendants. In these cases, the MPF filed actions due to illegal deforestation even when the defendant could not be identified, enabling the courts to enjoin the area from any economic use, which can combat land grabbing. However, in October 2020, the STJ adopted a favorable stance on continuing actions against uncertain defendants, leading to an increase in procedurally valid cases of this type after appeal judgments.
Proceeds will be used for debt refinancing, sustainability projects, and general corporate purposes
01/30/2025
ESG company Ambipar raised $400 million through a debt issuance in international markets, with demand for its green-labeled bonds exceeding twice the issued volume, reaching $850 million. The waste management company priced the eight-year bonds at 10.87%, slightly below the initial guidance of 11%, according to sources familiar with the transaction.
This is Ambipar’s second bond issuance in international markets. In January 2024, the company raised $750 million, surpassing its initial $500 million target amid strong investor demand. That issuance had a seven-year maturity and was priced at 9.87%, below the initial guidance of 10%.
Ambipar drew less demand compared to other Brazilian companies that recently entered the market. Usiminas and JBS, both frequent issuers, saw investor interest surpass their bond offerings by more than four times.
An investment banker, speaking on condition of anonymity, said Ambipar’s issuance faced challenges compared to other January offerings, attributing this to the company’s credit profile and lower market recognition rather than a shift in investor appetite.
Another person familiar with the matter noted that Ambipar operates in a niche sector with no direct international peers, making it harder for investors to assess its credit profile. However, the company still managed to extend the bond maturity and attract large investors focused on sustainable assets.
Market strategy
Ambipar initially marketed the bonds with a target issuance between $400 million and $500 million (a benchmark-sized offering). The company plans to use the proceeds to repay debt maturing in 2031, refinance other obligations, and fund general corporate purposes. An equivalent amount will also be allocated to sustainability projects.
In a statement, Chief Financial Officer João Arruda said the bond issuance would help Ambipar roll over short-term debt.
“We are very pleased with the outcome of the transaction. The issuance attracted high-quality investors who believe in Ambipar’s future and support our environmental agenda,” he said.
“The bond market offers an eight-year maturity, which is not available in the local market. As a prudent measure, we will use this issuance to refinance Ambipar’s debt due between 2025 and 2028, as well as part of the green notes maturing in 2031. This gives us a solid timeframe to execute our growth, profitability, and efficiency plans, increasing our cash generation and improving our credit profile over time,” Mr. Arruda added.
Fitch Ratings assigned the issuance a BB- rating, citing Ambipar’s strong position in the environmental services sector, growth potential, and geographically diversified revenue streams. However, analysts noted that the company’s high leverage and significant cash flow consumption for interest payments constrained its rating.
Ambipar joins JBS, Bradesco, and Usiminas, which also raised funds in the international bond market in January. JBS issued $1.75 billion, Bradesco secured $750 million, and Usiminas raised $500 million.
Investment banks had anticipated a stronger bond issuance season, but rising volatility in both domestic and international markets led some companies to postpone fundraising plans. The current issuance window is expected to remain open until the second week of February, when companies begin releasing fourth-quarter 2024 earnings results.
Ambipar’s issuance was jointly led by Bank of America, Bradesco BBI, and UBS BB, with settlement scheduled for February 5.
Company holds 70% of the business, valued between R$1bn and R$1.2bn; asset attracts major players in the electric sector
01/30/2025
Neoenergia is in advanced talks to sell its 70% stake in the Baixo Iguaçu Hydroelectric Plant in Paraná, Valor learned from four market sources. The asset’s valuation ranges between R$1 billion and R$1.2 billion. Copel holds the remaining 30% of the plant and does not plan to exit the company.
Potential buyers include French EDF, Brazilian Casa dos Ventos, Chinese Spic, and Czech EnergoPro, according to sources familiar with the matter.
If the sale is completed, the new owner will take over a project capable of supplying electricity to about one million people. The asset’s concession expires in 2049. Located in the final stretch of the Iguaçu River, between the municipalities of Capanema and Capitão Leônidas Marques in southwestern Paraná, the plant began operations in 2019 after receiving an investment of R$2.3 billion.
Sources indicate that the asset’s divestment process is in its final stages, narrowing down between EDF and EnergoPro. The sale of the plant is part of Neoenergia’s strategy of asset rotation to optimize and enhance its portfolio—conducting swaps and divestments for this purpose.
At the end of 2022, Neoenergia announced an asset swap with Eletrobras, valued at R$787.8 million, without cash transfer. In 2023, it completed the sale of 50% of a transmission platform to Warrington Investment.
Another reason is the company, controlled by the Spanish group Iberdrola, is also striving to reduce its leverage, with a net debt-to-Ebitda ratio at 3.43 times, according to third-quarter 2024 data. The previous year’s same period showed a ratio of 3.11 times, according to Valor Data. Currently, the net debt stands at R$50.6 billion.
The plant was auctioned to Neoenergia, with which Copel began negotiations in 2011. The project operates on a run-of-the-river model, using the natural river flow for power generation without requiring large reservoirs. This technology reduces environmental impacts by preserving the river’s natural dynamics and minimizing flooding, although it makes the plant more susceptible to water level fluctuations, potentially affecting output during droughts.
EDF is aiming to expand its presence in Brazil, already operating in transmission and wind, solar, hydro, and thermal power generation. In April 2024, the company participated in the contest for control of Empresa Metropolitana de Águas e Energia (Emae) but was outbid by the Phoenix Fund, owned by investor Nelson Tanure, who won with an offer of R$1.04 billion. Recently, EDF also acquired a solar energy park from Volga Energia.
EDF is France’s largest energy producer and returned to French state control in 2023 after nearly 18 years in the stock market. Its shares were delisted from the Paris Stock Exchange, and the nationalization cost the French government €9.7 billion.
The Czech company Energo-Pro is expanding its presence in the Brazilian market and seeking new opportunities in the hydroelectric sector. At the end of November 2024, the company acquired seven small hydroelectric plants (PCHs) from the Canadian manager Brookfield, totaling 90 MW of installed capacity. This move signals the company’s interest in strengthening its presence in the country, expanding its renewable generation portfolio.
Since acquiring Pacific Hydro, Spic has significantly expanded its presence in Brazil’s electric sector. The company controls the Millennium and Vale dos Ventos wind farms in Paraíba and acquired the São Simão Hydroelectric Plant for R$7.18 billion in 2017. In 2020, it expanded its investments in the thermal segment by acquiring stakes in GNA I and GNA II projects, while integrating future GNA III and GNA IV projects. The Chinese government-controlled company also reinforced its renewable generation presence by taking control of Canadian solar plants and announced the construction of a new wind farm in Rio Grande do Norte.
Casa dos Ventos, a wind energy producer owned by the Araripe family with French group TotalEnergies as a minority investor, also seeks to diversify its portfolio. Within its growth plan for renewable energy supply, the company is also targeting solar sources.
Neoenergia, Casa dos Ventos, and EDF did not comment when approached. Spic declined to comment on mergers and acquisitions. EnergoPro did not return requests for comment.
Environmental hurdles have been the main challenge for implementing new hydroelectric potentials, especially in the Amazon region. This scenario helps explain the growing interest from both national and international investors in acquiring operational assets.
Portuguese EDP resumed the sale process of the Santo Antônio do Jari (392.95 megawatts) and Cachoeira Caldeirão (219 MW) hydroelectric plants in Amapá. Âmbar Energia, a company controlled by holding J&F, purchased four Cemig hydroelectric plants in a late 2024 auction for R$52 million.
In January, Gerdau announced the purchase of two Small Hydroelectric Plants (PCHs), Garganta de Jararaca and Paranatinga II, in Mato Grosso, for R$440 million.
Over the past decade, with substantial changes in the energy mix, considering the significant increase in the share of sources that do not generate energy continuously, such as wind and solar photovoltaic, hydropower’s role has become crucial.
Marisete Pereira, president of Abrage, an association representing hydroelectric generation companies, explains that hydroelectric plants play an essential role in the reliability of Brazil’s electrical system, providing services such as power, flexibility, and other services, along with a centennial lifespan.
The electric sector estimates that 11 GW of power could still be added to the system through modernization and repowering of plants. This is equivalent to the capacity of the Belo Monte plant.
With the Capacity Reserve Auction (energy security) expected to occur in mid-2025, the expectation is that contracted plants will act as capacity reserves, adjusting generation according to demand and filling gaps left by intermittent sources.
*By Mônica Scaramuzzo e Robson Rodrigues — São Paulo
Administrative rule likely to update corporate revenue thresholds
01/30/2025
Brazil’s Ministry of Finance and Ministry of Justice and Public Security are expected to update soon the revenue thresholds that require companies to notify the antitrust watchdog named Administrative Council for Economic Defense (CADE) of mergers and acquisitions. Under Brazil’s antitrust legislation, companies are currently required to report deals if the parties involved posted revenues of at least R$750 million (one of the parties) and R$75 million (the other party) in the previous year. According to people familiar with the discussions, these thresholds will likely increase to R$1 billion and R$200 million—or maybe more.
According to sources, the update would be implemented through an administrative rule by both ministries and is primarily aimed at easing the workload of CADE’s General Superintendence—the division overseeing the initial review of mergers and acquisitions. That would allow more personnel to focus on regulating and overseeing big tech companies from a competition perspective, as part of a government proposal currently being drafted by the ministries to be sent to Congress soon.
According to government sources, this update could reduce the number of mergers requiring notification to the antitrust watchdog by about one-third, lowering the caseload.
The antitrust legislation (Law No. 12,529), enacted in 2011, originally set the revenue thresholds for mandatory notification at R$400 million for one party and R$30 million for the other. In 2012, the ministries of Finance and Justice raised these figures to the current R$750 million and R$75 million, respectively. Since then, no further adjustments have been made, despite inflation during the period.
Experts argue that the outdated figures have led to record-high caseloads at CADE, straining its lean staff. Additionally, companies have long called for an adjustment in the required threshold, as exemption from mandatory notifications would reduce legal costs.
In 2024, CADE data showed that 712 deals were reported, nearly 20% more than the previous year. In recent years, the antitrust regulator has sought ways to expedite reviews, including through artificial intelligence. The average processing time for standard cases dropped from 117 days in 2023 to 93.9 days last year.
A 2023 study by the Antitrust Research Group and the Center for Economic Freedom at Mackenzie Presbyterian University found that, based on the General Market Price Index (IGP-M), the revenue thresholds should be raised to R$1.7 billion and R$170 million.
According to Vicente Bagnoli, an antitrust law professor at Mackenzie and one of the study’s authors, the research concluded that most merger cases submitted to the regulator appear unnecessary. He noted that many deals are reported only due to outdated revenue thresholds rather than for posing a real risk of market concentration.
“Outdated thresholds contradict the spirit of the law,” Mr. Bagnoli said. He argued that adjusting the figures would allow the antitrust regulator to “optimize its resources, dedicating more time and personnel to expediting investigations into anticompetitive practices, such as cartelization and abuse of dominant position.”
Paola Pugliese, a partner at Lefosse Advogados and chair of the Competition Commission at the International Chamber of Commerce (ICC), said the update is widely welcomed by the market. “Because the current criteria have been in place since 2012 with no inflation adjustment, they now capture many more cases than when first established,” she noted.
Within CADE, opinions on the matter are divided. In early 2024, CADE President Alexandre Cordeiro suggested in an interview with Valor that other notification criteria should be modified instead of simply increasing the revenue thresholds.
“The push to update these figures seems driven by a desire to avoid notifications. Shouldn’t the goal be the opposite? Analyzing more cases would build a more comprehensive database and provide deeper insights into market dynamics. Is the antitrust regulator willing to forgo access to more data?” Mr. Cordeiro questioned at the time. “A key discussion point is whether we need to refine the criteria—perhaps using deal value alongside revenue thresholds.”
Some experts opposing the update warn that it could enable large corporations to acquire regional companies and expand their market power without the antitrust watchdog’s scrutiny.
“It’s questionable whether the update would weaken enforcement,” Ms. Pugliese countered. “Statistically, the vast majority of cases have low competitive significance.” She added that deals with a real impact on competition are unlikely to go unnoticed by CADE, which retains the legal authority to require notification even when a deal falls below the established thresholds.
Eric Hadmann Jasper, a partner at HD Advogados and an expert in antitrust legislation, echoed this view. “Updating the revenue thresholds makes a lot of sense,” he said. “It would be a simple way to free up internal resources for investigating unilateral conduct, particularly in digital markets, which are complex.”
Mr. Jasper emphasized that the antitrust regulator would still have mechanisms to detect problematic mergers, as competitors can file complaints with the agency. “It just requires vigilance, monitoring, and educational campaigns,” he noted.
CADE, the Ministry of Finance, and the Ministry of Justice and Public Security did not respond to requests for comment.
State Climate Change Yearbook reveals emission levels per million reais produced in each Brazilian state
01/29/2025
The more diversified the economy of Brazilian states and the more it leans towards services and industries, the more stable and lower the carbon intensity of the state’s Gross Domestic Product (GDP) becomes over the years. This is the key finding of the first State Climate Change Yearbook.
Developed by the Centro Brasil no Clima (CBC) and the Instituto Clima e Sociedade (iCS), with support from Itaúsa, the study compiles data on emissions, climate risks, and mitigation and adaptation policies and actions across various sectors of the economy in Brazil’s 27 federative units. From 2025 onwards, the publication will be updated annually.
In 2022, the six federative entities emitting the most carbon per million reais generated had economies based on agriculture and cattle management: Acre, Rondônia, Mato Grosso, Pará, Maranhão, and Tocantins. Not surprisingly, these are located in the Legal Amazon, where the highest emissions stem from deforestation and agriculture. Amazonas, also part of this geopolitical zone, ranked ninth in 2022. The exceptions are Roraima and Amapá, which appear at the bottom of the ranking.
These states aren’t necessarily the country’s main emitters, as the carbon intensity of GDP considers the ratio between each federative entity’s net annual carbon dioxide emissions (tCO2e) and its respective GDP.
This is the case for Acre, which, despite having a median level of emissions compared to others, leads the ranking due to its small GDP. Meanwhile, São Paulo and Rio de Janeiro, with high and intermediate emissions respectively, ranked among the lowest carbon intensity rates of GDP in 2022 (24th and 23rd positions), due to their large GDPs.
“When we analyze different states, we see that their economic matrix lead to vastly different carbon intensities and distinct land-use change requirements,” said Walter De Simoni, climate policy, institutions, and law manager at the iCS.
The emissions landscape across Brazilian states helps explain the country’s overall pattern—placing Brazil among the world’s top ten greenhouse gas (GHG) emitters. The majority of the country’s emissions (about 75%) stem from land-use changes and agriculture.
Guilherme Syrkis, executive director of CBC, adds that Brazil’s diverse regions have varying sources of emissions. “Poorer states tend to have higher emissions from deforestation and agriculture, whereas wealthier states see greater emissions from transportation, industry, and energy production,” he noted.
According to Fernanda Westin, a senior researcher and consultant at CBC, deforestation fluctuations from year to year significantly impact the carbon intensity of GDP in states heavily reliant on land use. Roraima exemplifies this trend, dropping from sixth place in 2021 to second-to-last in 2022.
Ms. Westin also pointed out that negative emissions can be achieved through carbon offsetting, “Carbon removals occur when forests are planted, and high-yield agriculture and pastures absorb CO₂ as vegetation grows,” she said.
The annual report further indicates that there is no direct correlation between a state’s net carbon emissions and the size of its GDP. For example, Mato Grosso leads the nation in emissions but ranks only 11th in GDP, according to the 2022 data presented in the report.
William Wills, CBC’s project director, emphasizes that the report is not meant to compare states—each with unique characteristics, histories, and future projections—but rather to highlight public policies being implemented so that civil society can monitor and advocate for change. “This helps push for a leveling-up process so that all states build the capacity to tackle climate change,” he says.
The goal, Mr. Syrkis adds, is to institutionalize best practices and demonstrate that states attracting the most green investments have structured climate and environmental policies. Seven Brazilian states currently have dedicated climate funds in operation or development: Espírito Santo, Mato Grosso do Sul, Amazonas, Rondônia, Santa Catarina, São Paulo, and Tocantins.
“Espírito Santo and Mato Grosso do Sul have stood out with promising policies and are becoming favorites of institutions like the Inter-American Development Bank (IDB), the World Bank, the European Bank, and Brazil’s BNDES. These banks follow a checklist, reviewing the entire multi-year planning process, including climate policies,” said Mr. Syrkis.
