UBS BB downgraded AES Brasil to sale and cut the target price from R$12 to R$9 per share – bad news for a company for sale. Analysts see the company having difficulty changing its current low asset performance, in a base scenario in which it remains leveraged and pressured by financial expenses.
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The bank sees the company as one of the most exposed in its energy coverage to the “curtailment effect” – the effects of reducing renewable energy generation in relation to capacity, to balance supply and demand. UBS BB remembers that from 2032, 100% of its generation will come from renewable sources. The bank’s account is for a reduction of around R$65 million per year in EBITDA from 2024 to 2028 – or a 13% impact on equity – for every 5% curtailment.
The American AES has put its Brazilian operation up for sale, but has had difficulty attracting proposals at the expected level. The only one on the table so far, as Pipeline anticipated, was from Auren – with a figure that was not pleasing. The company is trying to raise the bar and attract proposals from Chinese operators to increase competition in the process and improve prices.
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The company has 4.2 GW of installed operational capacity and 1 GW under construction. The controlling company is AES Corporation, with relevant positions in BNDESPar and Eletrobras. Votorantim, one of Auren’s controlling shareholders, has around 5%.
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