2W sees IPO further away, seeks plan B

Power company 2W has spent the last few weeks looking for alternatives to raise capital at a time when the cost of debt is putting pressure on all Brazilian companies as interest rates remain at 13.75% per year.

Having spent the beginning of the year talking to potential investors to gauge appetite for its IPO, the company has now spoken to asset management companies and does not rule out the entry of a strategic investor, sources told Valor.

Some asset management companies have already been consulted and are studying whether to make a contribution, two sources said on condition of anonymity. "Discussions are in the early stages with both strategic and financial investors," said one person familiar with the matter. Another person familiar with the matter recalled that 2W is well-regarded in the financial market, with great projects, but is "capital intensive, and costs have increased."

2W was founded by businessman Ricardo Delneri, who also created Renova, one of the pioneers of renewable power in the country. The company raised R$400 million in December 2021 and was valued at that time at R$2.7 billion. The market now values the company at around R$2 billion, sources say.

In the first weeks of the year, the company considered getting the IPO plans at B3 off the drawing board and visited a number of investors in a non-deal roadshow, but market conditions were not favorable for the IPO. The company hired the consulting firm Laplace and banks BTG Pactual, Santander, UBS BB, and Itaú BBA for the IPO.

A source close to the company said that the debts of its projects - Anemus and Kairós - are long-term, with the shortest maturities of the holding company, but nothing that would put pressure on the company. However, the idea would be to have a plan B to the IPO, since there is still no visibility on when the company will be able to go public.

Among the alternatives is the search for a fund or even a strategic investor, taking advantage of the moment of increased interest of companies in the energy sector in renewable power, with the attractivity of the ESG agenda. The possibility of postponing the projects for a few months has not been ruled out, as power prices are currently low because hydroelectric dams are working with full reservoirs.

The company is also analyzing the possibility of factoring receivables from contracts, said a source, something that would also bring cheaper funds to the company's cash flow. "The whole sector is doing transactions like that," a source said.

2W CEO Claudio Ribeiro told Valor that the company is not in a hurry to go public and is expected to publish a sound financial statement. He also said the company is not interested in a private placement.

In a note, the company said that "2W is at its best moment since its inception, which will be confirmed by the financial report to be released this week. The sole purpose of hiring Laplace is to advise the board of directors for an IPO, which aims to continue the company's accelerated growth."

Regarding credit sources, 2W said that it "carries out typical day-to-day transactions with various banks and/or capital markets (investment funds), known as working capital transactions and/or factoring of receivables, in a volume of less than 5% of 2W's total debt." "Most of the company's financing lines are project debt, with maturities between 18 and 24 years and grace periods of one or two years," the company said. "These lines are repaid with the cash flow generated by the wind projects, the first of which started to operate in January 2023 and the second of which is in the construction phase and will be completed this year. The next relevant financial maturity is in November 2025, when both wind farms will be operating at full capacity."