Eneva Plunges on Delayed Startup of Power Plant: Sao Paulo MoverDenyse Godoy and Julia Leite
Eneva SA, the Brazilian power generator controlled by EON SE and Eike Batista, plunged after a person with knowledge of the matter said the company is postponing the start of its Parnaiba 2 power plant.
The shares dropped an eighth day today, losing 5.6 percent to a five-year low of 1.85 reais at the close of trading in Sao Paulo. Volume was 3.5 times the three-month daily average. Today’s decline extended the loss this year to 38 percent.
The natural gas-fueled plant had been scheduled to begin operations by the end of March, said the person, who asked not to be identified because the delay hasn’t been publicly disclosed. The person said the company isn’t sure when the plant will go online.
The delay will force Eneva to buy electricity from other generators in Brazil’s North to meet its contractual obligations after spot prices surged because of a drought. That, combined with rising interest rates and cost overruns, prompted UBS AG analysts led by Lilyanna Yang to cut their rating on the stock to hold from buy.
“Eneva should soon run out of cash,” Yang, who also cut her 12-month price target by more than half to 2.50 reais from 7 reais, said in a report dated yesterday. Operational problems are coming “at the worst possible time.”
Eneva’s press office didn’t respond to phone calls and an e-mail today.
The stock is down 45 percent in the past month, the most among Sao Paulo’s 100 most-traded stocks. Eneva had plunged 72 percent in 2013 as investors speculated that the company might be dragged into a debt default along with other Batista companies.
The Rio de Janeiro-based company has said the plant would have a generating capacity of 517 megawatts and would boost revenue by 373.7 million reais ($156 million) a year.
In northern Brazil, Eneva expects wholesale-market prices to decrease on higher hydropower output, the person said. Dam reservoir levels in the north are at 75 percent, the highest among the country’s four regions, according to a statement on the website of the country’s grid operator.
Eneva’s output capacity is 2.4 gigawatts currently. The company announced yesterday that it got authorization from Brazil’s power regulator, known as Aneel, to start operations of the second generation unit at the Parnaiba 3 plant.