Without an IPO, 2W Energia is experiencing financial hardship and is looking for an investor

Without an IPO, 2W Energia is experiencing financial hardship and is looking for an investor
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05/13/2024 – With the market closed for initial share offerings for almost three years, 2W Energia, which planned to raise funds with an IPO, has been going through a financial squeeze, and is now negotiating the entry of one or more new investors to resolve the situation.

The CEO of 2W Energia, Claudio Ribeiro, told Mover/Faria Lima Journal that the company is facing “some short-term imbalance” in its cash flow, and that is why it decided to look for a partner, in conversations that are already close to an outcome, according to him .

“What ended up happening and what wasn’t in the script is that there hasn’t been an IPO in Brazil for three years… we also had a problem with delays in some projects,” said Ribeiro. “We could continue, wait for an IPO, but the wear and tear would be too great. We then decided to make a private deal.”

2W, which generates and sells renewable energy, planned the IPO to invest in wind farms, to sell production on the so-called free electricity market. Without the resources, it had to take out loans, including debentures convertible into shares, increasing leverage to around 8x-8.5x.

“We are negotiating very heavily with two investors. We should sign something by the end of next week, where the company will resolve itself. There will be a change in control, or in the corporate issue… to be able to deleverage the company, bring liquidity”, said Ribeiro.

Amid cash flow problems, 2W delayed some payments, and renegotiated some commitments, in addition to carrying out layoffs, several sources in the energy market told Mover. In this scenario, many companies have preferred not to risk doing business with the group, which ends up having to pay premiums in its operations.

“It’s something localized, it’s not that we stopped paying, we have a cash flow problem, basically concentrated in the first half of 2024, which has already been resolved”, explained Ribeiro.

According to the CEO, the deal to attract a new partner must involve a capitalization of between R$500 million and R$600 million, which in practice would provide an injection of liquidity into the company in the order of R$300 million.

Credit Suisse has supported 2W in the conversations, as it is a creditor of an issue of debentures convertible into company shares, and should seek to capitalize its credits in the operation, according to Ribeiro.

“We have super good profitability, we sell energy at great prices, but I cannot continue to deteriorate cash flow due to a financial restriction due to being overleveraged. I need to reduce leverage, and that’s why shareholders are giving up on having more value in an IPO”, he added.

According to the CEO, negotiations are with two potential investors with a financial profile and one strategic. “The urgency is there. Let’s make this move and fix the capital structure. When you deleverage, you acquire financeability again, and then the liquidity problem appears”.

2W attempted its first IPO in 2020. Afterwards, the company probed the stock market again in 2023 and 2024, but financial market operators still do not see an ‘open window’ for initial share offerings – the last one in Brazil took place in August 2021.

(LC | Editing: Luca Boni | Comments: [email protected])

*** This article was previously published for subscribers on Mover, TC Investimentos’ news service ***

The article is in Portuguese

Tags: IPO Energia experiencing financial hardship investor

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