Brazilian renewable energy company Renova Energia SA (BVMF:RNEW11) turned to a second-quarter (Q2) net profit mainly on the back of the sale of its stake in US-based TerraForm Global (NASDAQ:GLBL).
Renova said in late May that it was selling to Canada’s Brookfield Asset Management Inc (TSE:BAM.A) its 20.3 million shares in the yieldco created by bankrupt US renewables developer SunEdison (OTCMKTS:SUNEQ). This transaction, which closed on June 29, brought in a total of USD 107.8 million, including a USD-15-million compensation for terminating arbitration proceedings against TerraForm Global.
The Brazilian company’s financial report shows that it lost BRL 32.7 million (USD 10.3m/EUR 8.8m) on its investment in the US yieldco. However, the sale of the minority stake helped Renova book a second-quarter net profit of BRL 134.2 million versus a loss of BRL 39 million a year back, despite the fact that it recorded higher operational costs and administrative expenses during the three-month period.
For Q2, Renova also posted a 48.7% year-on-year jump in net operational revenue to BRL 184.9 million thanks in part to higher volumes of electricity sold in the free market. Earnings before interest, tax, depreciation and amortisation (EBITDA) were positive at BRL 157.4 million against a loss of BRL 2.54 million a year earlier. Adjusted EBITDA was negative at BRL 11.8 million versus earnings of BRL 13.3 million in Q2 2016 due to the negative result of the trading company, and higher expenses.
For the first half of the year, the company reported a net profit of BRL 38.5 million against a loss of BRL 590.6 million, and a 53% surge in revenue to BRL 337.2 million.
Debt-heavy Renova pointed out that the TerraForm Global stake sale is one of two important transactions implemented in recent months that jointly represent a major step toward re-establishment of the company’s financial equilibrium. The other transaction involved the sale of the 386.1-MW Alto Sertao II wind power complex in Bahia state to AES Tiete, the local subsidiary of US power producer AES Corp (NYSE:AES), for a base amount of BRL 600 million.
Renova intends to use the proceeds from the two transactions to cut debt and for the 437-MW Alto Sertao III project. At the end of the second quarter, the company’s total indebtedness amounted to BRL 2.71 billion, including short and long-term loans, financings and debentures.
In July, Renova unveiled it gave exclusivity to a local unit of Brookfield so it could conduct due diligence and negotiate final documents for a primary subscription of capital in the company. The Canadian asset manager is also considering buying the 22% voting stake in Renova held by Light Energia.
In addition, Renova is holding advanced talks to sell the 605-MW Umburanas wind farm complex in Bahia to a subsidiary of France’s Engie SA (EPA:ENGI). The company stressed that these negotiations do not affect its discussions with Brookfield.
Renova is mainly focused on generating electricity from wind farms and small hydropower plants. It also has one solar park. In total, the company's portfolio of contracted projects includes 1,111.6 MW of capacity, according to the financial report.
(USD 1.0 = EUR 0.852)
(BRL 1.0 = USD 0.315/EUR 0.268)
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