EDP ​​announces delisting in Brazil – 03/02/2023 – Market

The Portuguese energy group EDP announced this Thursday (2) a plan to delist EDP Brasil. The company’s objective is to bring greater flexibility in financial and operational management to the local subsidiary, in an operation that can move around R$ 6.1 billion, according to analyst calculations.

Close to 14:00 (Brasília time), the common share of EDP Brasil rose more than 15%. According to analysts, this is a common movement when a company announces delisting. Investors want to take advantage of the premium offered, and even try to pay a higher amount per share.

The delisting process has already been formalized at the CVM (Comissão de Valores Mobiliários), and takes place almost 20 years after the electric power company went public (IPO) in Brazil. EDP ​​has already requested the registration of a public offer for the acquisition (OPA) of all the common shares of EDP Brasil.

The price assigned by EDP will be BRL 24 reais per share, equivalent to a premium of 22.26% over the closing price of the share this Wednesday (1st), of BRL 19.63.

EDP ​​controls EDP Brasil, with 56% of the shares. Approximately 41.3% of the company’s shares are in the hands of minority shareholders, and the remaining 2.6% are in the company’s own treasury, as a result of repurchase offers.

The expected timeframe for the offering is at least seven months, with completion expected by the end of this year. To finance the operation, EDP Portugal announced that it will make a capital increase in the amount of 1 billion euros.

BTG Pactual will act as an intermediary institution for the OPA. The Morgan Stanley bank and the Mattos Filho law firm will also work as advisors for the operation.

According to the Portuguese headquarters, the proposal aims to simplify the corporate and organizational structure, providing greater flexibility in the financial and operational management of its operations in Brazil, where the group also operates with EDP Renováveis, a generation arm directly linked to the parent company.

In a press conference, the CEO of EDP, Miguel Stilwell d’Andrade, reinforced the company’s commitment to Brazil, saying that the group is a long-term investor, which has already gone through several economic and political cycles, and continues to see good growth opportunities.

Despite this, EDP’s strategic plan for 2023-2026, presented this Thursday, provides for a reduction in the group’s exposure to Brazil, with the country’s contribution to total Ebitda falling from 25% in 2022 to 14% in 2026.

The company did not open specific investment amounts for Brazil in the coming years, but said that its operation in South America, where the Brazilian market is the most representative, should receive 15% of the 25 billion euros in planned contributions until 2026.

Analysts would evaluate EDP Portugal’s offer positively, pointing out that the price offered per share in the OPA embodies an attractive premium for shareholders.

“The price that will be paid for the shares is 4.2% above our target price of BRL 23, implying a real IRR (internal rate of return) of 8.5%, which we consider attractive”, said the analyst. from XP, Maíra Maldonado.

The Credit Suisse team noted that the parent company’s movement is “out of consensus”, as several European electric companies have announced divestments in the face of a context of high leverage.

“We believe that to support such a proposal, EDP Portugal must be more confident in the market with regard to the renewal of distribution concession contracts, and in the growth potential with good returns of the sector in Brazil”, wrote Carolina Carneiro and Rafael Credit Suisse’s Nagano, in a note to clients.

EDP ​​entered Brazil in 1996, with the purchase of a stake in the former Cerj (today Enel Rio), and went public on the Brazilian stock exchange in 2005.

Today, the electric energy company operates in the segments of distribution, generation, transmission and offering solutions and services. In distribution, it serves approximately 3.8 million customers through two concessionaires, in São Paulo and Espírito Santo, in addition to being an important shareholder of Celesc, in Santa Catarina.

The company is also leading an important discussion about the renewal of energy distribution concessions in Brazil. EDP ​​Espírito Santo is the first of nearly 20 distributors whose contracts will expire in 2025. The Union has not yet defined whether the concessions will be renewed or whether new auctions will be held.