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Rio Grande do Sul sells CEEE-D to Equatorial in a process coordinated by BNDES

03/31/2021

The Equatorial Energy Group won the privatization auction of the State Electric Power Distribution Company (CEEE-D) of Rio Grande do Sul, held on the morning of Wednesday, the 31st, at B3, in São Paulo. The auction had an interested party qualified for participation. After the opening of the envelope with the economic proposal, the sale of the entire indirect equity interest of the state of Rio Grande do Sul in the company for R$ 100,000 was confirmed, also including the incorporation of debts and commitments of the company.

The company’s previous work of calculation of tax, social security and financial liabilities, which reached R$ 6.7 billion, allowed the success of the privatization. The sale of CEEE-D control was necessary to avoid the evolution of the expiry process of the concession contract in progress at the National Electric Energy Agency (ANEEL). The change of control will now allow the resumption of the company’s financial capacity, thus being able to invest in improving the provision of services. New investments of about R$ 1.6 billion are expected for the next five years, which will benefit about 1.8 million customers in 72 municipalities, including the Metropolitan Region of Porto Alegre.

The Brazilian Development Bank (BNDES) was hired by the government of Rio Grande do Sul to coordinate the privatization process of the company, with the technical support of the Minuano Energia Consortium – formed by Banco Genial, Thymos Energia and Machado Meyer – and EY, responsible for the second independent economic and financial evaluation. The modeling of the process involved the approval of capital increase by shareholders, transfer of obligations with former local authorities to the State and refinancing of the company’s tax debt. After the completion of the sale, CEEE-D will be responsible for bank debts and tax and social security obligations exceeding R$ 3.5 billion.

“All in all, this was a very challenging operation, but it shows that the partnership between the state government, the Federal Government, through BNDES, and the private sector builds and improves our country,” said BNDES President Gustavo Montezano, in a speech after the auction closed. “Once again, we prove that good projects in Brazil, well modeled, well-structured ones, can be made possible to the market.”

The governor of Rio Grande do Sul state, Eduardo Leite, stressed that “at the time of resumption after the pandemic, Brazil will need a lot of this strength, of energy, the country will need a CEEE-D with investment capacity, a CEEE-D with the capacity to serve its population, so that we can make all this energy become development, jobs and income for our population."

According to Augusto Miranda, CEO of Equatorial, electricity will be a very important commodity for the economic growth of a state like Rio Grande do Sul. “We promise to work restlessly, make prudent and necessary investments for this concession, to improve quality. And, of course, these investments that we will make, providing the state with this infrastructure, will greatly help Rio Grande do Sul to achieve the growth goals set by the government,” said the executive, in remote participation.

CEEE-D has accumulated successive losses in recent years, with recurrent defaults of state taxes. Moreover, the company could not meet the minimum regulatory parameters related to quality in the provision of services and economic and financial sustainability, which implied an imminent risk of expiry of the concession contract. The change of management to a private group will improve the company’s investment capability, consequently achieving all operational parameters and providing the best service to the population.

“At the present time, it becomes more important than ever, with the progress of the pandemic and the high indebtedness of the Brazilian public sector, having an efficient public machine. Having a state that is light and unburdened will be fundamental for the resumption and for us to deliver quality of life to Brazilian citizens,” Montezano concluded.

About BNDES – Founded in 1952 and currently linked to the Ministry of Economy, BNDES is the main instrument of the Federal Government to promote long-term investments in the Brazilian economy. BNDES’s actions focus on the socioenvironmental and economic impact in Brazil. BNDES offers special conditions for micro-, small- and medium-sized enterprises, as well as social investment lines, directed at education and health, family agriculture, sanitation and urban transport.  In crisis situations, BNDES acts in an anticyclical manner and assists in formulating solutions for resuming economic growth.

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