Light renegotiates debt and tries different treatment in concession renewal – 03/29/2023 – Market

Electric company Light has started conversations with creditors to renegotiate debts and, in parallel, is trying to anticipate the renewal of its distributor’s contract with “differentiated” treatment for particular issues in its concession area, said this Wednesday the company’s CEO, Octavio Lopez.

In a conference call to comment on the financial results, he said he sees a challenging scenario ahead for Light to be able to restore its economic-financial balance.

The company, which distributes energy in 31 municipalities in Rio de Janeiro, has been suffering not only from structural issues in its concession, such as a persistently high rate of energy theft, but also from a billionaire cash outflow due to the return of tax credits to consumers. power.

According to Lopes, the fight against energy theft and default is “unfeasible” in the so-called Severe Operation Restrictions Areas (ASRO), where the company is unable to enter to cut off irregular connections and collect retroactive invoices.

As a good part of its consumer base is in ASROs, the company has been defending a “differentiated treatment” for the regulatory parameters of losses due to energy theft and default.

“In order to guarantee the long-term sustainability of the concession… We have to have, in the case of Light, this differentiated treatment for ASROs”, said Lopes.

Light ended 2022 with a net loss of BRL 5.67 billion against a profit of around BRL 400 million in 2021, due to the impact of provisions for the return of billions of tax credits and the complexities of its concession.

The company’s shares were down about 17% by 1 pm.

early renewal

The electric company has already started conversations with the regulatory agency Aneel and with the granting authority regarding the renewal of the distributor’s concession, which expires in May 2026.

The company’s intention is to anticipate this process to bring more clarity about the future of its business, helping it in its process of capital restructuring and debt renegotiation.

At the end of 2022, Light’s consolidated net debt was R$9 billion, with more than R$3 billion due in 2023 and 2024.

Lopes said that the company is seeking with creditors a sustainable solution for its indebtedness and that it will not do anything “pushing with the belly”. The most likely is an exit that deals first with short-term cash flow needs, so that later capital readjustment is negotiated with a view to the long term, he evaluated.

Still on the conference call, Lopes stated that the company’s “number 1 priority” is to maintain the normality of its operations. According to him, despite the structural financial imbalance, the company “works very well” and is in compliance with all sectoral obligations and complying with regulatory targets.

“If you compare it with famous restructuring processes in the sector, (they) involved companies that were in default with quality, sectoral obligations, taxes, with energy suppliers. Light is in default… and far from having negative Ebitda”.

Lopes also stated that the company should not resort to legal measures in its restructuring and that a return of the concession is “very unlikely”.

“The distribution concession devolution process has never occurred in Brazil, it is extremely complex”.