Brookfield Asset Management has refrained from improving an original bid for Brazilian renewable power company Renova Energia SA, after due diligence proceedings showed liabilities that were unaccounted for, a person with direct knowledge of the situation said on Thursday.
Brookfield is leaning toward presenting a bid to Cia Energética de Minas Gerais SA and Light SA, valuing their combined 67 percent voting stake at the equivalent of 9 reais (US$2.85) per unit of Renova, said the person, who asked for anonymity because the transaction remains private.
A final round of auditing in Renova showed an unnamed project bore a shortfall that had been previously unaccounted for, the person said, without elaborating. Brookfield may pay Cemig and Light 7 reais per unit outright, with the rest being disbursed after completion of the Alto Sertão III project, the person said.
A spokesman for New York-based Brookfield’s Brazilian unit declined to comment.
Reuters had reported on Friday that Brookfield was considering offering Cemig and Light up to 11.75 reais per Renova unit to facilitate a deal. Each Renova unit consists of one common and two preferred shares.
In addition to the auditing impasse, Cemig’s precarious financial situation also played a role on Brookfield’s decision, the person said. Cemig, Brazil’s most indebted utility, has struggled to sell assets this year, and faces 9 billion reais in debt maturities by year-end 2018.
Units of Renova shed 1.2 percent to 9.27 reais on Thursday, after five straight sessions of gains. Speculation of an imminent deal with Brookfield has driven units 29 percent higher over the past month.
The offer has yet to be submitted formally to Cemig, Light and Renova, the person said, noting that it could be submitted “within days.”
Getting the nod from both Cemig and Light would enable Canada-based Brookfield to take control of Renova more assertively and expand faster in Brazil’s renewable power industry. Brookfield could pump extra capital into Renova following the deal’s completion and even take the company private, the person said.
(Reporting by Guillermo Parra-Bernal; Editing by Richard Chang)
Photo courtesy of Renova Energia SA