CPFL focuses on expansion and is interested in buying Cemig

São Paulo — more than two years after the acquisition by the Chinese State Grid and shortly after an offer of shares that raised 3.7 billion reais, the electric CPFL Energia is in a new phase of expansion, in which it will evaluate new projects and opportunities that may arise in PRI Of Cemig, said to Reuters on Friday the president of the company. The strategy is to look active in all areas of the company's operations — from generation and renewables and distribution to transmission lines — and also to leverage the strong reduction in the company's indebtedness in relation to the leverage level of recent years. "When you look at the size of CPFL and also the size of our shareholder, it gives a little perspective of great ambitions for the company. I would say that, by the size, we do not rule out any kind of potential asset, "said Gustavo Estrella, who took charge of the electric in December. The speech came after questioning Reuters about a possible interest in Cemig, a giant controlled by the state of Minas Gerais. The governor of Minas Gerais, Romeu Zema, has been talking about privatizing the company, and Cemig's president, Cledorvino Belini, said on Friday that a project in this direction should be sent to the local legislature by the end of August. "The geographic location is important, especially when you talk about distribution, and Cemig is in the same region as CPFL, so it is an asset that we would have to look at and evaluate," said Estrella, adding that the company would "undoubtedly" evaluate the Active if it is placed on sale. Cemig has a market value of about 22 billion reais, according to data from Refinitiv Eikon. The State Grid, the world's largest electrical company, paid 14.2 billion reais for controlling CPFL at the beginning of 2017, in a closed transaction with Camargo Corrêa and funds that had a stake in the company. At the end of the year, the Orientals paid more 11.3 billion reais for minority shares, raising the slice in the company. "No asset takes CPFL out of a possible process only by size, it is much more by the characteristic, technical and financial rationality," said Estrella. According to him, CPFL has a well-defined strategy of being a "consolidator" in the distribution sector, where it is one of the largest in Brazil, with concessions in the state of São Paulo and Rio Grande do Sul, taking advantage of possible acquisitions and privatizations. In the area of transmission, the company will be looking at auctions of new projects by the Government to grow, focusing on smaller assets and close to its operations. A schedule scheduled for December is already on the radar and is subject to studies in the company. In generation, the idea is to use as a growth platform CPFL Renováveis, a clean generation arm of CPFL that already operates 2.1 gigawatts in wind, biomass and solar power plants. CPFL will still buy a stake in its subsidiary CPFL Renováveis today owned by the State Grid with resources raised in the recent re-IPO, taking advantage to integrate more companies. "We now place CPFL Renováveis as our investment vehicle in this sector... We envied a series of opportunities in this market, whether in consolidation, because it is also a fragmented market, as well as in the development of new projects. " In parallel, CPFL will need to decide by the end of the year whether it will keep CPFL Renováveis listed in stock or take stock of the market company, Estrella said. This is because the company will have 99.94% of the subsidiary after purchasing the stocks of the State Grid, which is not allowed by the new market rules of the B3 stock Exchange, which requires between 15% and 25% of the outstanding roles. Favourable conditions The president of CPFL Energia said the success of the company's re-IPO and low leverage leave the company in a good position to pursue its growth strategy. "Since the acquisition by the State Grid, the company has had an adaptation/integration phase. Undoubtedly, our re-IPO process is the beginning of a new phase, "said the executive. The relationship between net debt and adjusted EBITDA of the company closed the second quarter at 1.93 instead, against 2.72 times at the end of the first quarter and 3.05 times at the end of 2018. The indicator came above 3 times since at least 2014. "It has an IPO cash entry effect... But even disregarding this box shows a reduction in leverage... is still a comfortable situation. With our assessment today of how it is put, we have the capacity to address our growth, "said Estrella. With more than 100 years of history, CPFL is one of the largest electric companies in Brazil, with a participation of 14% in the distribution market and 2.2 gigawatts in conventional generation capacity, not counting 2.1 gigawatts of CPFL Renováveis. The company also operates in transmission, commercialization and services. The company's controller, the State Grid, the world's largest electrical industry, serves 1.1 billion people in China and still has business in countries like the Philippines, Portugal, Australia, Italy and Greece.