Auren’s Acquisition of AES Brasil Reshapes Energy Market

Auren Energia, controlled by Votorantim and Canadian CCP Investments, acquired AES Brasil after two months of negotiations.

This acquisition makes Auren the third largest power generator in Brazil, with a capacity of 8.8 gigawatts (GW). It also solidifies Auren as the leading energy trader.

The combined company will have net revenue of R$ 9.6 billion ($1.86 billion), a 55% increase over Auren’s previous earnings.

The adjusted EBITDA will rise from R$ 1.8 billion ($349 million) to R$ 3.5 billion ($680 million).

AES Brasil shareholders have three options: convert shares into the combined company’s shares, convert shares into cash, or choose an intermediate option.

The exchange ratio is 0.762 shares of AES Brasil for each share of Auren.

AES Corp. holds 47.3% of AES Brasil’s capital through two holdings. BNDESPar owns 7%, and Luiz Barsi Filho holds 5%.

The remaining 40.7% of shares are publicly traded. AES Brasil, originally AES Tietê, was established in 1999 and is listed on B3’s Novo Mercado.

The acquisition adds a portfolio of assets with a capacity of 5.2 GW to Auren.

These assets include 12 hydroelectric plants in São Paulo (2.66 GW), nine wind farms in the Northeast (2.2 GW), and two solar complexes in São Paulo (328 MW).

Auren has a pipeline of 4 GW in wind and solar projects.

The merger creates significant synergies, estimated at R$ 1.2 billion ($232 million), through process optimization and reduced administrative expenses.

Auren’s Acquisition of AES Brasil Reshapes Energy Market

Since its creation in March 2022, Auren has evaluated many growth opportunities through mergers and acquisitions.

None matched the strategic alignment and transformational potential of AES Brasil, according to Auren CEO Fabio Zanfelice.

The deal, subject to approval is expected to close in the second half of 2024.

This sale helps AES Brasil manage its R$ 9.25 billion ($1.8 billion) debt, resulting in a leverage ratio of 5.5 times adjusted EBITDA.

For AES Corp., the transaction eliminates nearly $2 billion in debt from its global balance sheet.

Notably, AES Brasil’s debt resulted from its accelerated investment plan since 2017, primarily funded through debenture issues.

AES Brasil has 25 energy assets totaling 5.2 GW. In 2023, it reported R$ 3.4 billion ($660 million) in net revenue and R$ 1.7 billion ($330 million) in EBITDA.

Auren sells 4.1 GW of energy in the market, over 5% of Brazil’s total consumption.

The acquisition provides Auren with a diversified mix of renewable energy sources: 54% hydroelectric, 36% wind, and 10% solar.

However, neither AES Brasil nor Auren commented on the deal, which concluded on Wednesday evening after three days of intense negotiations.