CPFL Renovaveis IPO failure delivers blow to wind's financing options

BRAZIL: One of Brazil's largest renewables developers, CPFL Renovaveis, announced last month that it was cancelling plans to float itself on the country's stock market. Failure of the proposed initial public offering (IPO) has come as a blow to developers in the country seeking to reduce the reliance on national development bank BNDES.

"It's a shame that the IPO didn't go ahead, it would have been the beginning of a new financing option for renewables in Brazil's wind sector," said Caroline Lacerda, director at the National Association of Financial and Capital Market Entities (Anbima).

According to Lacerda, other companies that are investing heavily in renewables, including wind power, were already planning to issue new shares to increase financing options for their expansion and, at the same time, reduce exposure to BNDES.

CPFL Renovaveis was preparing to hold an IPO before the end of this year to raise around BRL 800 million (£394 million) of its planned BRL 1.4 billion investment for 2014. The preliminary prospectus states that 80% of the funds received from the shares would be spent on investments and 20% on acquisitions.

On 4 October, the company cancelled the IPO alleging unfavourable market conditions. The company plans to restart the IPO by the beginning of next year, CPFL Renovaveis' chairman Wilson Ferreira said after the cancellation. But sector consultants say it could take longer.

Concession changes

The unfavourable conditions referred to by CPFL Renovaveis is an upheaval in the market caused by the government's decision to introduce new rules for the renewal of power concessions of distribution companies and large and medium-sized hydroelectric generation plants.

In exchange for favourable renovation of concessions for 30 years, the government imposed a reduction in electricity rates and changed calculations of amortized assets. Companies now have until mid-November to declare whether they will renew concessions or hand them back to the federal government.

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