CPFL Leans on Esteves to Revive Renovaveis IPO: Corporate Brazil

Utility CPFL Energia SA (CPFE3) is depending on billionaire Andre Esteves’s Grupo BTG Pactual to raise at least 899 million reais ($400 million) at an initial public offering of its renewable-energy developer as investors shy away from Brazilian stocks.

CPFL Energias Renovaveis SA (CPRE3), which shelved an IPO last year, and its shareholders are seeking to sell at least 71.9 million shares for 12.51 reais to 15.01 reais each, according to a prospectus on its website. The developer of clean-energy projects from wind farms to forest biomass plants said it plans to release the deal’s results today. Investment bank BTG Pactual, the leading underwriter in the offer, agreed to buy as many as 40 million shares for 12.51 reais each should demand fall short, the company said.

The pledge from BTG, along with a similar commitment from Banco do Brasil SA (BBAS3) pension fund Previ to buy 31.9 million shares, is crucial to ensure the offer succeeds after two other deals were postponed last month. Airline Azul Linhas Aereas Brasileiras SA and cement maker Votorantim Cimentos SA delayed IPOs after Brazil’s sluggish growth, accelerating inflation and weakening currency pushed the Ibovespa benchmark stock gauge down 23 percent in 2013, erasing $248 billion in market value.

“If a bank is guaranteeing to buy a large portion of an offering, investors will take this as a good sign,” Vitor Leonardo de Siqueira Sousa, an equity analyst at Mexico City-based brokerage firm Corporativo GBM SAB de CV, said by telephone. “Now that the dust has settled a bit after last year, I think things will go well.”

Global Turmoil

The company, known as CPFL Renovaveis, suspended an IPO last year because of the turmoil in global markets that followed the speculation that Greece could default on its debt and leave the euro area, Investor Relations Director Eduardo Takeiti said in a July 3 interview in Sao Paulo. The offering is more likely to go ahead today because it has two of the country’s biggest investors backing the deal, he said at the time.

CPFL Renovaveis is also better positioned to sell shares than it was in 2012 because more of its projects are producing electricity and generating revenue now, Takeiti said. It has almost doubled generation capacity to 1,153 megawatts since its August 2011 inception as a joint venture between CPFL Energia’s renewable-energy assets and local developer ERSA Energias Renovaveis. The company has 582 megawatts of capacity under construction, including 18 wind farms.

Press officials at BTG and Previ didn’t respond to phone calls and e-mails from Bloomberg News seeking comment on the deal. An official at CPFL Renovaveis declined to comment.

Share Rally

A 10-month surge in shares of Renova Energia SA (RNEW11), Brazil’s only publicly traded developer that focuses on wind farms, may bolster investors’ confidence in CPFL Renovaveis as the rival bucks a rout of hydro-power utility stocks, Maria Gabriela da Rocha Oliveira, a Sao Paulo-based analyst at Bloomberg New Energy Finance, said yesterday in a telephone interview.

Renova has jumped 56 percent in Sao Paulo since Sept. 11, when President Dilma Rousseff announced a plan to force large hydro-power companies to cut rates in exchange for license renewals that sent their shares plunging. State-run Centrais Eletricas Brasileiras SA, which holds most of the power dam permits being renewed under Rousseff’s plan, dropped 48 percent over the same span and CPFL Renovaveis’s parent lost 7.4 percent.

“Up until recently, investment in renewable energy was basically just asset financing,” Oliveira said. “Having more companies going public shows that the market is maturing and aligning with other clean energy markets around the world.”

A press official for Renova Energia declined to comment on the company’s share performance when contacted by Bloomberg News.

Major Shareholders

While BTG’s support may help CPFL Renovaveis sell the shares, the deal may not attract some investors because most of the funds will go to major shareholders instead of the company itself, said Rodolfo Amstalden, an equity analyst at consulting firm Empiricus Research.

The company is seeking to raise at least 350 million reais by selling 28 million new shares, while major shareholders including funds managed by private equity firm Patria Investimentos SA are selling 43.9 million shares valued at 550 million reais, based on the lower end of the offering’s target.

“Considering the size of its investment plan, the money being raised by the company itself is not very relevant,” Amstalden said by phone from Sao Paulo. “It’s a deal that’s more interesting for the shareholders, which will end up raising more money than the company.”

CPFL Renovaveis is investing 1.1 billion reais this year to expand its power generation capacity, according to the offering’s prospectus.

The wind power developer “is a serious company with a strong brand and large pipeline” of renewable-energy projects, Corporativo’s Sousa said. “I think this offering will go ahead.”

To contact the reporters on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net; Stephan Nielsen in Sao Paulo at snielsen8@bloomberg.net

To contact the editors responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net; Jessica Brice at jbrice1@bloomberg.net

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