Organized crime is one of the causes of crisis at Light – 05/12/2023 – Market

Light, which filed for bankruptcy this Friday (12), is one of the largest energy distributors in the country. It serves 4.5 million users in Rio de Janeiro, the sixth consumer market in this segment. However, 20% of its coverage area is in areas dominated by drug trafficking and armed militia control.

In some places, such as the West Zone, the militia even makes connections in their real estate projects using Light’s energy and charging the final consumer as if they produced the energy.

In areas where the call comes from the distributor, the militia charges an additional fee, which ends up encouraging the customer to give up the official service.

It is a vicious circle, as the greater the losses, the greater the costs that need to be apportioned among the payers, increasing the electricity bill of those who pay on time.

“The militia parasitize the urban infrastructure in a kind of extractivism”, says Daniel Hirata, coordinator of the Nucleus for the Study of New Illegalisms at the Fluminense Federal University, who studies the phenomenon in Rio and attests that it is serious.

Due to the high cost of energy theft and default, the company burns cash, as they say, that is, it consumes more resources than it manages to earn. It’s about R$ 800 million per year.

“People usually say that, in a normal situation, it already fries the box”, says Ângela Gomes, from PSR, a consultancy specializing in energy. “At the current moment, this uncertainty in relation to the concession is very bad, it is destroying value.”

The company recorded in the financial statement for the third quarter that it had a debt of R$ 8.7 billion. Managers of energy-oriented funds told the report, on condition that their names were not mentioned, that it would be natural for banks not to roll over the company’s debt within the period that covered the post-2026 period.

However, the deterioration in the credibility of a relevant shareholder at the beginning of the year, added to the company’s already known losses and the lack of definition of the concession make dialogue difficult.

Solutions are not many and require negotiation

The perception in the market is that the current crisis tends to trigger the discussion about the fate of the concession.

There are not many alternatives, but they all require negotiation and include the same starting point: it will be necessary to create a particular concession model for crime-ridden areas in Rio de Janeiro.

The specialists’ assessment is that the standard regulation model does not work, and the losses are high and considered unsustainable for the private investor, which increases the chance that LIght will revive crises.

Among the suggestions evaluated in the market are removing dangerous areas from the concession or compensating in some way for losses, without transferring them to the electricity bill, as this would make the cost prohibitive for the consumer.

Who evaluates the issue says that, if the current shareholders want to remain, regulatory changes can be made, but not contractual changes, in the evaluation of some legal areas of the sector. It is understood that the TCU (Tribunal de Contas da União) does not allow changes in the current concession contract. So there would be a limitation for the current shareholders. You will need to consult the agency.

They would also have the option to sell the company to other controllers.

In this case, it would be necessary to reduce the final price, even if there was a revision in the concession model. Light’s assets are worth R$10 billion, but the assessment is that there would be some difficulty getting an investor to pay the full amount for a company involved in crisis. An eventual rebidding would follow the same path.

The idea of ​​renationalizing the company, as has happened in the past, is off the radar. In that case, the billionaire account would have to be paid by the Union.