Renova Energia of Brazil Overcomes Cash Crunch by Selling Their Wind Farm for $193 Million

Renova Energia is an energy company that works in the sector of the renewable energy and has its base in Brazil. For quite some time now, the company had witnessed a decline in its profit. The reason that could be attributed to this decrease in the profits earned can be attributed to the fluctuation in the demand of the energy, change in policies and lack of a coping mechanism to meet the challenges of the ever-demanding markets. Due to all these factors, the company had experienced a severe crisis as well as cash crunch.

To overcome this challenge, the company decided to sell one of the projects of the wind farm. So, on Tuesday, Renova Energia sold the wind farm facility to one of the units of AES corp. The purchase of this wind farm was made at a handsome sum of 600 million reais (Brazilian currency) or 193 million dollars. This helped the renewable energy company, Renova Energia to replenish its resources and earn some respite at times of distress.

Some of the sources that were aware of the communication taking place between the two companies regarding the deal said that the sale of the wind farm project will be serving as a condition for the plan that has been devised by Brookfield Asset Management Inc. to enter and set foot in the controlling block of Renova Energia in an agreement.

The sources also said that this deal is likely to be evaluated at nearly 1 billion reais (Brazilian currency).

AES Tiete Energia SA revealed during a security filing that the company has planned to consume a debt worth 1.150 billion reais (Brazilian currency), which has been owed by the Alto Sertao II project.

If this project works according to the plans and meets the deadlines of the objectives as and when required or if the project is able to outperform some of the metrics of operations that are unspecified, then in these cases the value of the deal is going to increase. The increase in the value will be somewhere around 100 million reais (Brazilian currency) in a time duration of about 5 years.

On 2nd January, 2017, media had reported that AES Tiete and Renova, which is a unit of the AES Brazil, had reached a settlement with the Alto Sertao II project. The accord had been agreed to by both the companies and the amount of the debt that had to be exchanged was in the range of 600 million reais (Brazilian currency) – 700 million reais (Brazilian currency).

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