Light’s crisis anticipates debate on end of concessions

The shares of the energy distributor Light sank this Tuesday (7), in a new round of losses that mark the distrust of investors in relation to the future of the concession. The quotation plunged 13.55% on the day, closing at R$ 2.68. It was the second biggest drop, behind only Americanas, which retreated 21.39%.

Light has numerous well-known issues. Since 2020, when the share was worth R$ 23.23, the accumulated loss is 88%. However, stress of this magnitude was not on the radar of managers in the energy area at the beginning of the year. The largest portion of the debt, for example, matures only in 2024.

The new round of shareholder losses was triggered by the company itself when it became public, at the end of January, that it had hired the services of Laplace, known for restructuring companies with financial problems, including the operator Oi.

Also contributing to heighten distrust is the fact that Light has businessman Carlos Alberto Sicupira among its largest shareholders, also a reference shareholder in Americanas, the retailer in deep crisis. Sicupira is a partner of the 3G group, along with Jorge Paulo Lemann and Marcel Telles.

The entrepreneur has just over 10% of the company, second only to the Samambaia fund, owned by investor Ronaldo Cézar Coelho. Those who follow the company say that, in recent years, the duo had a decisive influence on the management of the business because of this shareholding weight.

There are those who interpret the market’s bad mood with Light as contagion from the Americanas. There are also those who suspect that the company may have hired Laplace in anticipation of a move, because there would be some serious problem to be presented in the balance sheet for the fourth quarter, as happened with Americanas.

There were numerous rumors, including the one that the company would file for judicial recovery, something that the law prohibits for distributors.

In addition to mistrust and short-term conjectures, those who know the distributor inside say that the situation is delicate and sends out important signals for the energy sector as a whole, which is in a moment of revision of concessions.

According to the government’s official schedule, which authorizes companies to provide public services, 20 energy distribution concessions will expire between 2025 and 2031. About 18 months before the final date, companies need to take a position on the issue. However, there is no sign so far about how these concessions would be forwarded by the MME (Ministry of Mines and Energy) and by Aneel (National Electric Energy Agency).

Public managers claim that the lack of definition about concessions is the worst scenario in the provision of services. Companies tend to be paralyzed, hold back investments and various service problems can arise in this vacuum. The same goes for investors and creditor banks. They don’t move.

Trafficking and militia action leads industry to discuss special model for Light

Light is the second in this line of contracts with an end date. The concession will expire in 2026. But its more fragile situation at the moment makes creditors more rigorous.

It 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 is 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, with the 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 period after 2026. However, the deterioration of 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 right now.

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. If the review said, 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 re-bidding 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.

When contacted, Light did not respond until the publication of this text.