Auren lost – but ended up winning

On Friday, Auren Energia lost the dispute for CEEE-G, the power generator in Rio Grande do Sul, by a difference of only R$ 800 thousand.

Auren, which was born from the merger of the former CESP with the energy assets of Grupo Votorantim and CPP Investments, offered BRL 927.2 million for CEEE-G, while CSN bid BRL 928 million, a premium of 10.9 %.

But in this case, losing was good – at least in the market’s view. Auren’s share rose as much as 5% and closed up 1.36% on Friday, when the auction result was known.

For Antonio Junqueira, the head of research at Citi, “the message from investors seems clear, whether they agree with it or not: with few exceptions – such as Eneva and Equatorial – investors [do setor de energia] they want dividends and a minimum allocation of capital.”

The result also showed that Auren is not willing to grow at any cost — and that management will have discipline in capital allocation.

According to Junqueira, the share also rose because the company’s investment decision process proved to be “solid”.

“They liked the asset, did their due diligence, thought competition would be limited (which helped in their initial analysis), participated in the auction… and lost,” Junqueira wrote to the bank’s clients. “Losing is good sometimes, and a loss in an auction should have the same weight as a win when you look at a company’s ability to allocate capital.”

Auren was born from the former CESP, which was privatized in 2018 when the Votorantim-CPP consortium purchased the asset, which until then was basically composed of three hydroelectric plants.

In March, the controllers proposed a corporate reorganization, merging these hydroelectric plants with the generation assets of the Votorantim Group, including some wind farms and an energy trader.

Since then, the company has signaled to the market that it intends to set in motion a growth agenda focused on M&As.

Votorantim and CPP control Auren with 37% and 32% of the capital, respectively. The company is worth R$ 14 billion on the stock exchange.

Pedro Arbex

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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