Braskem said to plan spin-off, IPO of biopolymer business

Geração de caixa da Braskem bate recorde de R$ 7,1 bilhões em 2018

Braskem plans to spin off its biopolymer (green plastic) business into an independent company that will have other partners and shares traded on the stock exchange in Brazil or the United States, sources say. As a result, the Brazilian petrochemical company, which still have fossil raw material as its main source, seeks to go global and unlock market capitalization.

Braskem, which is controlled by Novonor (formerly Odebrecht) and Petrobras, hired Citi to draw strategic and financial investors to the project. The deal is valued at around $2 billion — the company plans to raise around $500 million, two sources familiar with the matter said.

According to another source, the format of the operation, which will finance the expansion of the production capacity of bioethylene and plastic resins from renewable sources, like ethylene glycol, is expected to be defined in two or three months.

Braskem intends to reach an installed capacity of 1 million tonnes of green plastic in the world by 2030, compared to the current 200,000 tonnes per year. Investments are estimated at $1 billion to $1.5 billion in this period.

To accelerate the project, the petrochemical company has been talking to potential financial partners, holders of innovative technology and suppliers of renewable raw materials. Fund Advent was one of the possible investors approached by the company. The manager, which has businesses in the chemical segment, was not interested because it would have a minority stake, sources say.

Two sources said that Braskem does not rule out running the project through a “special purpose acquisition company” (SPAC), taking advantage of environmental, social and governance (ESG) elements. In practice, SPAC is a listed company that does not have any asset.

In Brazil, Embraer resorted to a similar operation to enable the growth of its urban air mobility company. Eve is on its way to being listed on the New York Stock Exchange (NYSE) through Zanite, a U.S.-based SPAC founded by Kenn Ricci, co-owner of Directional Aviation, one of the largest executive jets operators in the world, and Steve Rosen, with Resilience Capital Partners.

According to sources, Braskem is also in initial talks with Cosan, which already supplies ethanol for the production of green ethylene by the petrochemical company in Triunfo (Rio Grande do Sul). According to a source familiar with the matter, Cosan is not interested in equity participation at this first moment.

The spin-off of the green ethylene business could drive Braskem shares, despite being a small operation compared with others in the company “This is a business that generates value, but that is not yet included in the price of the company as a whole,” said a source in the financial market, who asked not to be named.

In January, Braskem tried, without success, to carry out a secondary offering. It was not for lack of interest in the shares, but because investors were asking for discounts to take part in the operation.

Currently the largest biopolymers maker in the world, Braskem is investing $90 million to expand the production of green ethylene in Triunfo, which will start operating in December this year. With the contribution, the production of green ethylene will rise to 260,000 tonnes per year from 200,000 tonnes per year.

The second factory is expected to be installed in Thailand and the plan is to build two other production units, totaling four. There is no new expansion project in Triunfo so far, but the Rio Grande do Sul complex could be a candidate for future investments.

In Thailand, Braskem signed a letter of understanding with one of the largest local petrochemical companies, SCG Chemicals, to evaluate a joint investment in a new bioethanol dehydration plant to obtain green ethylene and produce biopolyethylene.

Braskem, Advent and Citi declined to comment. Cosan denied that it is in talks with Braskem.

Source: Valor International

https://valorinternational.globo.com

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Judges pressure Senate to reinstate wage bonuses

Renata Gil — Foto: Divulgação
Renata Gil — Foto: Divulgação

The presentation of three amendments to the constitutional amendment proposal PEC 63 — which had been stalled for eight years — generated expectations in the Senate that the bill will soon be put on the agenda. This proposal reinstates an additional 5% to the salary of judges and public prosecutors every five years — hence the name quinquennium. It was outlawed in 2005.

If the expenses foreseen for the two careers included in the original bill (judiciary and federal and state prosecutor’s office) are computed, the annual budget impact is R$3.6 billion. There are amendments that extend the bonus to public lawyers, federal prosecutors, public defenders and chief police officers. This would add R$900 million to this bill, without taking into account state employees in those categories. These estimates refer to active servers. The inclusion of retirees at least doubles these figures.

The president of the Association of Judges of Brazil (AMB), Renata Gil, says she has received the support of the Federal Supreme Court Chief Justice Luiz Fux. All his predecessors in office in recent years, she says, have supported AMB’s request. When contacted by Valor, Justice Fux did not return the call. Senate President Rodrigo Pacheco (Social Democratic Party, PSD, of Minas Gerais) denied that the PEC will be put on the agenda this week.

This is not the first time that a legislative proposal ignores the article 114 of the Constitution, which conditions the increase in expenses to the indication of the relevant source of revenues. The uniqueness of this PEC is the support it receives from the state careers whose mission is to ensure compliance with the Constitution.

The proposal, authored by former Senator Gim Argello, has been in the Senate since 2013. As of March 10 this year, it received two amendments from the Workers Party (PT) and one from the União Brasil (UB).

The Constitution, however, was not enough to prevent PEC 63 from being rescued during this legislature. The sign that it might be put on the agenda was given by the presentation of three amendments between March 10th and 16th, after eight years frozen in the Senate. Two of those amendments are from PT senators Humberto Costa (Pernambuco) and Rogério Carvalho (Sergipe), and one from União Brasil Senator Soraya Thronicke (Mato Grosso do Sul). All of the amendments add categories to be benefited by the reintegration of the five-year term to the public service.

Ms. Gil says that the PEC does not bring a hike, but a “restructuring” of the careers, as it happened recently with the military and public defenders. The judges also felt hindered in comparison to the careers of the Federal Attorney General’s Office (AGU), federal prosecutors who began to earn attorney’s fees borne by the loser as of 2016. Of the 12,253 employees of these careers (including retirees who are also contemplated), 62% receive R$10,000 in those fees per month in addition to their salaries (the minimum wage of the segment is R$21,000).

The head of AMB says that the funds must be sought in the budget itself from an adjustment of accounts of each court. She defends that the restructuring is a way to avoid that the outgoing salary of the judges is similar to the incoming one, but it does so without reducing the former and, instead, by increasing the remuneration along the career with quinquennia that are not subject to the remuneration ceiling of the Federal Supreme Court.

Ms. Gil says that the Brazilian Judiciary system, one of the most expensive in the world, is not so costly because of the judges’ salaries, but because of the free access to justice guaranteed by the Constitution. According to AMB, there are 75 million cases being tried in Brazil, which gives an average of 4,000 cases for each of the 18,000 active judges. This is due to the free costs of lawsuits, which also explains why there are 1.3 million lawyers in the country. In Portugal, she says, the restriction in access means that there are only 400 cases per judge.

The pressure for the return of the quinquennia grew with the accumulation of three years without salary increases for the judiciary. It is a movement to get around the fiscal limitations, like the one that happened in 2000, with the creation of the housing allowance. The difference is that now the circumvention of the cap seeks shelter in the Constitution. The categories to be contemplated have a floor of R$21,000 (AGU and Public Defense) and a ceiling of R$39,300 (Supreme Court).

If the bill is passed, it will lead to a cascade of claims throughout the federal civil service. Judges and prosecutors claim 20% losses since 2019 while half of federal servants have no salary increases since 2017, accumulating losses of 28.5%.

Source: Valor International

https://valorinternational.globo.com

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OAB/SP – PORTARIA Nº 354/22/PR

*We inform you that our partner Alberto Murray Neto has been appointed to integrate, as an effective member, the Special Committee on Business Law of the Brazilian Bar Association. Alberto becomes a member, therefore, of two Commissions of the Brazilian Bar Association, namely: (a) Compliance and Integrity; and (b) Business Law.*

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JBS reports best year ever, record profit

Gilberto Tomazoni — Foto: Silvia Zamboni/Valor
Gilberto Tomazoni — Foto: Silvia Zamboni/Valor

After distributing more than R$7 billion in dividends and investing $2.1 billion in acquisitions, JBS released Monday its 2021 results, which confirmed that the year was the best in the company’s history in several aspects — from growth, with record revenues and EBITDA, to shareholder remuneration, which achieved a return of more than 70%.

Boosted by strong demand for beef in the United States, in Brazil and in the international market, JBS reported a net income of R$20.5 billion in 2021, more than triple that of the previous year (R$4.6 billion). Alone, the fourth quarter result was already higher than the full year of 2020. From October to December, JBS profited R$6.4 billion, up 61% year over year.

The second largest non-financial company in the country, behind Petrobras, JBS had net revenues of R$350 billion last year, an advance of 29.8%. In the fourth quarter, revenues, mostly generated in the U.S., rose 27.8% to R$97.2 billion.

Thanks to the exceptionally positive moment in the operations abroad, especially in the U.S., the pressure of costs that harmed the business in the Brazilian market (Seara, above all) was not able to bring down the result of JBS. In the year, EBITDA increased 54.5%, to R$45.6 billion. With this, the adjusted EBITDA margin rose 2.1 points, to 13% in 2021. In the fourth quarter, adjusted EBITDA reached R$13.1 billion, an increase of 86.9%. Thus, the margin advanced 4.3 points, to 13.5%.

In an interview with Valor, CEO Gilberto Tomazoni celebrated the ability that JBS had in 2021 to combine multi-billion investments in acquisitions and organic expansions (there were more than R$20 billion last year) with shareholder returns. “JBS is the best option in the market. Not only for what it delivers in the short term, but for the potential it still has,” he said.

With share buyback programs (R$10.6 billion) and dividends (R$7.4 billion), JBS made a “dividend yield” of 8.2% in 2021, CFO Guilherme Cavalcanti said. When you add up the valuation of JBS shares on the stock exchange (the share rose 60.4% last year, while benchmark stock index Ibovespa declined 11.9%) and the return to shareholders in the form of dividends and buybacks, JBS’s total shareholder return reached 73.4%, Mr. Cavalcanti said.

In addition, the investments JBS has been making are remunerating shareholders’ capital well. In 2021, the return on invested capital (ROIC) metric reached 24.1%, up from 20.4% in 2020. This metric has been evolving at least since 2018, when it was 11.6%. “Our average cost of capital is 7.5%. That shows JBS’s value creation,” he added.

Last year, JBS’s capital structure also improved, which helped the company earn investment grade, reducing the cost of debt. In December, the net debt-to-EBITDA ratio in dollars was 1.46 times, the lowest in history. In September, it was 1.49 times. With cheaper debt issues — the group issued $1.5 billion in notes in January, JBS lengthened the average maturity from 5.9 years in 2020 to 8.1 years. The average cost of debt fell to 4.3% per year.

“Our capacity to cover debt service became stronger,” said Mr. Cavalcanti. The ratio between JBS’s EBITDA and financial expenses rose to 11.6 times from 7.8 times. “What it generates in free cash flow is greater than any debt amortization. The refinancing risk is zero,” stressed the executive. Last year, free cash flow generation totaled R$11.9 billion.

For 2022, JBS maintains positive expectations. In the United States, the demand for meat remains firm, while Asia buys more and more. The margin of the beef business in the U.S. is not expected to be as high as it was, unusually, in the last two years, but it is possible to say that it is structurally higher than in the past decade. In Mr. Tomazoni’s reading, even with a slightly lower supply of cattle in the U.S., margins would remain in the “high single digits.” In the past, U.S. slaughterhouses celebrated when they had margins of 6%.

Source: Valor International

https://valorinternational.globo.com

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With Russia on hold, NDB to extend credit to other partners

The New Development Bank Turns Six: Evaluating Successes, Failures and Challenges - Centre for Public Policy Research (CPPR)

The interruption of operations with Russia will lead the New Development Bank (NDB), the BRICS bank, to automatically extend credits to the other partners of the institution. Valor found that the expectation, which dates from before the war, is that financing for Brazil will total at least $6 billion over the next five years.

The dilution of the weight of projects in Russia in the portfolio of the BRICS Bank has entered the radar of rating agencies. Last week credit rating agency Fitch reaffirmed the “AA+” rating but revised the bank’s outlook from “stable” to “negative”. It explained that the revision was motivated mainly by the risk in the context of the Russia-Ukraine war, Russia’s role as a major shareholder in NDB (19% of capital at the end of 2021) and the bank’s exposure in that country (13% of loans).

At the same time, the agency reaffirmed the “AA+” rating, which it said reflected “the bank’s strong credit fundamentals, including its large capital cushions.” Also, the liquidity rating was unchanged at “aaa,” mainly reflecting the “excellent” liquidity buffers the bank must keep in relation to its short-term financial commitments.

In a statement, Fitch said it understood that NDB has frozen all operations in Russia and that given the dynamic growth of its loan portfolio, as a newly established bank, it expects a rapid dilution of the bank’s exposure to Russia in the coming years. “Despite Russia’s role as a key shareholder, we do not expect NDB to be directly affected by any sanctions imposed by the West,” Fitch said.

Taking into account the current shareholder structure, in which each of the BRICS countries (Brazil, Russia, India, China, South Africa) owns about 20% of the bank, Fitch thinks there is a risk that conflicting views on the Russia-Ukraine conflict could affect the relationship between the bank’s shareholders and the agency’s governance assessment. As a result, it has revised the ESG relevance score on the governance structure to “5” from “4.” Fitch cites the abstention of China, India and South Africa in the UN General Assembly vote to condemn Russian aggression in Ukraine. Brazil voted to condemn the aggression.

Fitch also thinks that Russia’s presence as a key shareholder in the NDB could dissuade future members from joining the bank if Russia remains isolated internationally. In its solvency assessment, it considers the bank’s main weakness to be its loan concentration risk, with the bank’s five largest exposures accounting for 85% of loans at the end of 2021.

For its part, the S&P global rating agency maintained the NDB’s rating at “AA+” (long-term) and “A-1+” (short-term) with a stable outlook on February 28, four days after Russia’s outbreak of war against Ukraine.

The NDB did not comment on the rating by the rating agencies. At the beginning of the month, it took a three-line statement, in a technical tone, to announce that it had put its operations with Russia “on hold”.

Now, the credit portfolios will increase for the other founding partners and the new partners — Bangladesh, the United Arab Emirates, Egypt, and Uruguay — will also start to obtain financing, while the relative size of Russia’s portfolio will shrink.

Source: Valor International

https://valorinternational.globo.com

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GE signs contract for hydroelectric plant renovation

What are the Four Major Types of Hydropower Plants?

After 44 years in operation, the São Simão hydroelectric plant will undergo modernization. The Hydro division of GE Renewable Energy and SPIC Brasil, a subsidiary of State Power Investment Corporation of China (SPIC), signed a R$700 million contract for the modernization of the plant’s generating units and auxiliary services.

The contract provides for the supply of equipment for the turbines, generators and auxiliary systems, in addition to the entire project engineering and integration, assembly and commissioning of the six generating units.

Claudio Trejger, CEO of GE Renewable Energy’s Hydro division in Latin America, told Valor that a new bid was made and the consortium led by GE – with the support of Powerchina – won.

“This asset is more than 40 years old, and every plant with more than 30 years old is already subject to some modernization to ensure availability for another 40 or 50 years and bring best digital practices in line with the present day,” he said.

Under the contract, GE Renewable Energy is responsible for 70% of the works. The execution of the project is expected to last nine years, with scheduled shutdowns of the generating units in order to update the systems and leave the plant more time available. Spic Brasil’s chief executive, Adriana Waltrick, believes that the investment in the plant is key as the company has goals for a transition to clean sources energy.

“The modernization prepares the São Simão hydroelectric plant for the future, reinforcing the efficiency and reliability of our main renewable power generation asset in the country, which is being equipped with the most modern technology,” she said.

Located between the municipalities of Santa Vitória (state of Minas Gerais) and São Simão (state of Goiás), São Simão is fundamental for Brazil’s energy security. With an installed capacity of 1,710 megawatts, the plant could power around 6 million homes.

The hydroelectric plant belonged to Companhia Energética de Minas Gerais (Cemig) and GE was already in talks for modernization, but there was change in the company’s strategy to sell assets and the contract was cancelled.

In 2017, the Brazilian Electricity Regulatory Agency (Aneel) held a concession auction. SPIC Brasil won São Simão’s concession in the following year after a bid of R$7.18 billion. The Chinese company also committed to a robust modernization plan of around R$1 billion.

The plant has six generating units with 285 MW each, in addition to a reservoir capable of storing 2.54% of the reservoir volume of the Southeast/Central West System. Ms. Waltrick also highlights the importance of the project for an energy-consuming region, in a context of growing energy demand.

“The plant is located in an important and strategic electro-energy flow region, and is an important source for Brazil’s power generation system,” Mr. Waltrick said.

Ms. Waltrick says that there is a first planning phase of a year and a half of engineering, development and integration, before starting work at the plant.

“The downtime per machine is 10 months. We will replace some parts of the turbine and we will recover or manufacture others, then there is the assembly and testing. We will stop one machine a year,” she said.

Mr. Trejger points out that it is not a repowering process, since the plant will not have an increase in power. With an additional investment, this could be done. “The plant has six machines, but the civil construction was made to have ten machines and could add another four…In the future, it is possible to increase the generation capacity of the power plant at the end,” he said.

GE is also working on the modernization of Ilha Solteira (3,444 MW) and Jupiá (1,551 MW), owned CTG Brasil, and sees a market for modernization and repowering, since the current Brazilian hydroelectric segment has important plants operating for more than 70 years and in need of retrofit. In addition, the last auction with medium and large hydroelectric plants was held in 2013 and currently the Electric System Expansion Plan does not foresee new plants due to environmental reasons.

Source: Valor International

https://valorinternational.globo.com

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XP targets companies with cash surpluses

Rodrigo Moreira and José Berenguer — Foto: Silvia Zamboni/Valor
Rodrigo Moreira and José Berenguer — Foto: Silvia Zamboni/Valor

XP intends to strengthen its hand in the space it considers less busy in the corporate segment: that of companies with cash surpluses rather than those that require credit – and typically provide better returns to banks.

After revenues in the segment reached R$850 million last year, compared with zero three years earlier, the platform plans to go a long way in the so-called “middle market,” which brings together businesses with revenues above R$200 million. XP was born making only investments and now boasts R$815 billion under custody.

XP, with about 50,000 clients in its portfolio and R$65 billion under custody in this segment, plans to reach 400,000 companies by 2025 and increase revenues with the segment tenfold by then. Last year, net funding was close to R$30 billion. To expand its base, XP bets on independent financial advisers connected to the platform, which have been adding specialized labor. Of the 500-people commercial team, 90% comes from the external channel.

Since it went public on Nasdaq, at the end of 2019, XP has said that people in Brazil are leaving large banks behind, a move still in its earlier chapters. Yet, XP itself became a bank by setting up the infrastructure of services existing in the old-school financial firms. This created the conditions to move beyond investments. Now the firm wants to repeat in the corporate business what it achieved among individual clients.

“[Corporate] clients who are purely investors are not the main targets [of banks]. They are not the ones who pay the highest spread because they have more bargaining power, they are not so dependent on credit, the bank does not get a ‘cross sell’ so easily,” said Rodrigo Moreira, a partner at XP who leads the corporate business since 2019, after a decade at Itaú. “Banks don’t have a broad suite of products in the portfolio for investment clients. It’s an easier arena for us to fight in.”

By starting with the investment end, XP follows the same logic that helped it scale up services to individuals. This approach includes a platform open to third-party products and a technological overhaul that matches the regulator’s agenda with the advent of open banking to foster competition, said José Berenguer, CEO of Banco XP. “The banking segment will be part of our services, but we will work to connect other providers to our platform. We try to have simple contracts and price appropriately as we do not have to shoulder fixed costs,” he said, referring to distribution through independent financial advisers.

The base is the investment account, since the XP bank account for companies is not yet transactional, Mr. Berenguer said. The firm expects to increase the power of attraction when this stage is over, something expected for later this year. The executive says it is reasonable to estimate that at the current growth rate, the segment will double in size every 18 months.

According to the executive, this customer group is poorly served in traditional bank branches, which depends on credit, pay expensive rates and is the first to suffer in crises. “It is the first credit that disappears,” Mr. Berenguer said.

Offering unsecured credit is not, however, in the original script of Banco XP. “We have also been doing it, but it is not the flagship. Many credits are collateralized [with investments], but our role is also to teach how to take credit, to have a financial life more adequate to the reality of the budget, of the companies’ income,” he said.

Mr. Moreira believes that over time credit will become important for XP as a whole. “Will it be the most important line? Only time will tell, but it is unlikely to happen in the short term.” He says that the company already has some structures where it takes some risk, combining investment collateral. The most likely is to move into some kind of working capital, with export financing lines, with the use of derivatives and treasury operations.

When mapping the universe of entrepreneurs or executives in leading positions in the companies, XP counted about 150,000 clients within its own base, Mr. Moreira said. This has been the starting point. There is synergy with the public served in private banking, of high-net-worth individuals and families.

Source: Valor International

https://valorinternational.globo.com

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GDP survey shows stagnant economy

Claudio Considera — Foto: Leo Pinheiro/Valor
Claudio Considera — Foto: Leo Pinheiro/Valor

The economic activity fell 1.4% in January compared to December, according to GDP Monitor — an indicator calculated by think tank Fundação Getulio Vargas (FGV) to measure the monthly evolution of the economy, unveiled on Monday.

Claudio Considera, the economist in charge of the readings, says that the result indicates stagnation in the economic activity in early 2022. This is because there are no signs of robust reaction in key segments of the economy, such as household consumption and services economy — the latter representing more than 70% of the GDP.

According to him, Brazil does not have, at the moment, conditions for sustainable growth this year, and is expected to end up with a variation close to zero in the GDP in 2022, compared to last year. “We have today a perfect picture of a totally stagnant economy,” the specialist said.

FGV also unveiled that, in the GDP Monitor, the economy grew 1% in the moving quarter ended in January, compared to the one ended in October 2021. Compared to January last year, the economy grew 1.2% in January this year, with expansion of 2% in the quarter ending in January, compared to the same period in the previous year.

Mr. Considera said, however, that those increases are favored by the low base of comparison, referring to last year, and do not represent the economy accelerating at the beginning of 2022.

This is because the faster advance of vaccination against Covid-19 only happened in mid-2021, when the gradual reopening of the economy began to take place, as people went back to work and restrictions on circulation were eased. Immunization against the disease started in Brazil only in January last year — a month in which the economy, especially in the commerce and service sectors, was operating at a weak pace, hampered by the pandemic, and was strongly affected by social distancing measures designed to contain contagion.

On the demand side, one factor that help form the current moment of weaker activity is the weakening of household consumption at the beginning of the year, Mr. Considera said. In the GDP Monitor, in January, household consumption fell 1.3% compared to December last year.

There was an increase of 2.2% compared to January 2021, but the analyst said that the use of a low base of comparison influenced upwards the high results seen in the indicator in January 2022. In the moving quarter ended in January versus the one ended in October, household consumption grew only 0.8%.

“Household consumption is falling, and now with higher inflation it will be even harder to grow,” he noted, adding that higher inflation leads to lower real household income. “We are not seeing any sign of improvement [in family consumption],” he said.

Another aspect Mr. Considera mentioned was the Russia-Ukraine war, which has led to a surge in the price of oil abroad and to increases in fuels in Brazil. As long as the war goes on, the price of a barrel of oil in the foreign market may remain high, making prices soar in the Brazilian domestic market, he said.

On the demand side, the services sector is not showing good signs on the margin either. In January, this activity fell 1.7% compared to December last year in the GDP Monitor.

According to Mr. Considera, the factors at the moment indicate that the country does not show the necessary conditions to grow above 1% a year in 2022. “I don’t see conditions to strongly grow this year. We are expected to have a very weak growth of 0.6%, 0.7% [in the 2022 GDP],” he said.

Source: Valor International

https://valorinternational.globo.com

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GreenYellow invests R$350m to expand in Brazil

GreenYellow vai fornecer energia solar para Oi e Magazine Luiza

GreenYellow wants to expand in electric mobility, energy storage and digital services in Brazil. The goal is to complement activities in energy efficiency and distributed solar generation, fields in which the subsidiary of the French group Casino has been operating here since 2013, said Roberto Zerkowsky, the company’s country head.

GreenYellow expects to invest R$350 million in the country this year. “The novelty for 2022 is the horizontal portfolio,” Mr. Zerkowsky said.

The company will bring to Brazil starting this year the charging solutions for electric vehicles offered in France, where it has more than 250 electric charging stations in operation. The focus is on projects that support electric mobility. According to the executive, there is potential to provide services for companies interested in electrifying their fleets, such as logistics firms and those that embraced a work-from-home policy.

In January, GreenYellow closed a local partnership with NewCharge, a Brazilian engineering and development company for electric power storage. “The intention is to expand the number of charging stations in Brazil. We are monitoring the expansion of electric vehicles,” Mr. Zerkowsky said.

GreenYellow is also expanding its solar power generation capacity in Brazil. The goal is to add more than 50 megawatts in generation plants to the portfolio this year and reach an installed capacity of 150 MW in the country by December.

The growth strategy may involve acquisitions of projects and development of own plants, the executive said. In November, GreenYellow unveiled the purchase of a 90% stake in five distributed generation solar plants from FazSol around Brasília, with a capacity of 4.4 megawatts-peak.

In 2021, GreenYellow grossed R$304 million in Brazil, up 83% year over year. The company operates in eight countries in the solar power, trading, energy management and energy efficiency businesses. The company entered Poland last year as part of its strategy to expand operations in emerging countries, which includes South America and Asia.

GreenYellow ended last year with an installed power generation capacity of 740 MWp around the world, up 31% year over year. The company has 3,000 efficiency projects in place worldwide, which meant global power savings of 985 gigawatt hours by 2021.

About a third of the global volume of energy saved by GreenYellow’s clients last year came from contracts in Brazil. “We are talking about R$140 million in savings [with energy efficiency], given the tariffs of the Brazilian market,” he said.

Mr. Zerkowsky predicts that the segment will grow worldwide with the crisis generated by the war in Europe, which raised energy prices. Considering the higher demand for efficiency seen before the war, the company started to offer service contracts in Brazil in the last few months.

This way, GreenYellow makes available the rental of equipment that helps save energy and takes responsibility for the operation and maintenance during the entire contract. This type of solution brings greater predictability to the customers’ cash flow, Mr. Zerkowsky said. The model was used in an agreement for the lighting of Leroy Merlin stores, for example.

Grupo Profarma, Lojas Quero Quero and Panvel signed contracts with GreenYellow in Brazil in 2021. Mr. Zerkowsky points out that, today, the group’s clients are mainly companies from the pharmaceutical, telecommunications and retail sectors, but the intention is to also cut deals with mining, metallurgy and food processing companies this year. “We are in a growth pace in Brazil,” the executive said.

According to him, the company maintains its intention to go public, as announced last year. However, there is still no definition about deadlines.

Source: Valor International

https://valorinternational.globo.com

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Asset managers see foreign flow to B3 losing steam

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After receiving R$73 billion in foreign funds this year to March 16, more than any full year since official records began in 1994, the secondary market of B3 may see the flow slowdown in the coming months as the global landscape for stocks undergoes adjustments, asset managers told Valor.

To be sure, global investors continue to see support for commodity-linked stocks, which account for 40% of benchmark stock index Ibovespa, but a shift in focus to assets more reliant on the local economy seems increasingly less likely, as inflationary pressures intensify and the Federal Reserve has already started its monetary tightening cycle.

The Ibovespa is up 9.8% this year, while S&P 500 is down 6.3%, Nasdaq lost 11.6% and Stoxx 600 fell 6.8%. The positive performance, however, is strongly concentrated in the blue-chip companies, those with the greatest weight in the local index, and in the mining, steel, financial and oil and gas industries, the favorites of global investors because of their liquidity.

Before the beginning of the Russia-Ukraine war, in February, analysts saw a potential migration of international capital to assets more linked to the local economy, expecting a slowdown in inflation and a reversal of the Central Bank’s monetary policy after the presidential election, scheduled for October. This scenario seems distant now.

“Central banks in Latin America had been preparing for months for this monetary tightening cycle, trying to stay ahead of the curve, but the impact of the war is essentially inflationary, with high food and energy prices. It’s not catastrophic, but it makes the landscape more challenging and delays expectations of a turnaround,” said Alejo Czerwonko, chief investment officer for emerging markets and Americas at UBS, which has a neutral recommendation for Brazilian assets.

UBS BB, the arm of the Swiss bank in Brazil, believed that the Selic could reach 13.75%. But after the local policymakers’ decision on Wednesday to raise Brazil’s benchmark interest rate to 11.75% and signal another 100-basis points hike, UBS revised its projection for the final rate to 12.75%. The difference, however, is that the bank’s analysts now predict that the rate will remain at this level by March 2023.

As a result, the environment is less favorable for the recovery of assets linked to the domestic scenario, Mr. Czerwonko said. He cites the Federal Reserve’s monetary policy decision, unveiled on the same day, as a potential watershed for the stock markets.

“Fed’s statement was tough, indicating several hikes and showing concern with inflation, which is likely to mean less liquidity and funds for emerging markets. In addition, investors have left some sectors of the U.S. stock market, such as technology, to protect themselves from interest rate hikes, but now this seems to be more priced in, so we may start to see the move lose steam.”

Along these lines, Marko Kolanovic and Bram Kaplan, with J.P. Morgan, wrote in a report that they no longer believe that U.S. growth assets have much correction ahead. “Markets can anticipate turning points, so we believe it is time to start adding risk in many fields that have experienced too strong a correction,” they argued.

Mr. Czerwonko, with UBS, also points out that Brazil’s historical problems, such as the lack of a growth rate more compatible with emerging economies, help explain why the local market took a back seat in recent years and its use only as a “tactical refuge” during commodity boom cycles.

“Besides markets such as China, India and Southeast Asia presenting consistently better activity figures, the elections, which were pushed to the back burner in recent months, are likely to gain prominence throughout 2022,” he said.

Mauro Oliveira, head of Latin America equities at Credit Suisse, said that the Brazilian central bank and the Fed released tough statements, which shows discomfort with inflation that may impact assets more dependent on local activity. However, the flow will continue, even at a slower pace, with the help of commodities, he said.

“Foreign investors are likely to tap the local market at a slower pace, with profit-taking moves in some days or even leaving some stocks. In some sectors, like construction, is very hard to invest now because of poor results and labor cost inflation. But the Brazilian stock exchange is a commodities exchange, there is no way to escape this, and this segment is likely to draw money throughout the year.”

Alexandre Reitz, head of equities at Julius Baer Family Office, follows the same path. He points out that, in communication with clients, local equities have started to carry more risk than they did at the beginning of the year due to the factors added in recent weeks.

“We could already see a recovery in domestic assets at the beginning of 2022, and this has been extended a bit further ahead. But the constructive view about commodities remains. The profitability level last year had been high and was telegraphing a correction, but the war has changed this landscape,” he said, pointing out that he has started to look for positions in more resilient domestic assets, such as the clothing sector.

Credit Suisse estimates that Brent oil, the benchmark for Petrobras, is likely to remain at the level of $100 by the end of 2022 due to persistent supply problems. Iron ore is likely to stay above $120 throughout the second half, even as discussions of control in steel production remain in China.

As for the Asian powerhouse, Messrs. Oliveira and Czerwonko saw favorably recent remarks of vice premier Liu He. He said the government will stimulate the country’s economy again and work to organize its stock market. Besides commodities, the analysts say the changes can impact Chinese assets, which trade at a discount level in some sectors compared with the Brazilian market.

As for the Brazilian real, which has appreciated firmly this year, the three financial firms see resilience at current levels, given local interest rates and high commodity prices. Mr. Oliveira, with Credit Suisse, points out that there may even be a correction in case of occasional risks, to between R$5.25 and R $5.30, but that foreigners would soon return to set up positions in the local currency.

Source: Valor International

https://valorinternational.globo.com

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