Ronaldo Cezar Coelho, the largest shareholder in Brazil’s troubled utility Light SA, is planning to weather the storm and keep his stake as the firm begins talks to restructure debt and negotiate the renewal of a key concession contract.
(Bloomberg) — Ronaldo Cezar Coelho, the largest shareholder in Brazil’s troubled utility Light SA, is planning to weather the storm and keep his stake as the firm begins talks to restructure debt and negotiate the renewal of a key concession contract.
Coelho, who owns 20% of the century-old power company through his Samambaia fund, saw shares slump more than 80% in the past three years, hovering near record lows, as high interest rates, skyrocketing delinquencies and energy losses in Rio de Janeiro state due to illegal power connections erode results.
He’s confident that Light will be able to secure the renewal of its concession in the region — which accounts for the majority of its overall business — at more favorable terms.
“Light’s historical importance, which lured me into the investment thesis, does not correspond to the reality of a concession area that’s held hostage by organized crime,” Coelho, 76, said in an interview, in reference to densely populated urban areas known for drug trafficking and gang violence. “There will be a solution that recognizes this situation in Rio, where more than half of the energy distributed to residences is stolen. In Rio, even luxury electric cars are charged with stolen power.”
Chief Executive Officer Octavio Pereira Lopes told analysts last month that the company should have a differentiated treatment in concession-renewal talks with the government and power regulator Aneel regarding areas that bring severe restrictions to its operations.
The concession expires in 2026, but Light has to express interest in renewing it by June and Aneel has 18 months after that to give an answer.
While uncertainty lingers and cash dwindles, Light was granted a legal protection that temporarily suspends payments of some financial obligations of around 11 billion reais ($2.2 billion). Coelho said he’s willing to help in the restructuring if needed.
Light’s dollar bonds due in 2026 trade around 32.5 cents on the dollar, according to Trace data. That’s down from 83 cents at the start of the year.
“As a shareholder, I’ll wait,” said Coelho, who has held stakes in other Brazilian energy companies like Vibra Energia SA and Energisa SA. “I’ve invested in stocks for more than 50 years and I know that life goes on.”
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