Why Rio energy firm Light blames ‘cats’ for its financial woes

Light S.A., a holding company in the electricity sector, filed for bankruptcy protection at a Rio de Janeiro business court last week, citing gross debts of BRL 11 billion (USD 2.24 billion). The holding firm controls power generator Light Energia, electricity trader Light COM, and, most importantly, Light SESA, a utilities company that distributes electricity to 31 cities in Rio de Janeiro state by way of a concession from the local government. 

Founded in 1905, Light S.A. posted its biggest losses ever in 2022 (down BRL 5.6 billion), pressured by rising debts, defaults, and lower demand from larger clients. Profit in Q1 of this year provided a brief glimpse of optimism, but structural hardships remain as do the high financing costs driven by Brazil’s record-high interest rates. Struggling to pay its debts without government permission to increase electricity tariffs, the company had to seek bankruptcy protection.

According to Light, its difficulties are partly due to illegal power hookups, which sees more than half of its distributed energy stolen and has cost the company around BRL 1 billion a year for the last decade. 

Those pesky cats

An illegal electricity hookup is known in Brazil as a gato, which is also the Portuguese word for “cat.” There is no consensus about the term’s origin, with one possibility being that cats often move stealthily, like thieves (see: “cat burglar”). Another theory links the word to a tool used in civil construction called a gato, which is a metallic clamp used to make concrete blocks. 

Gatos are common in poor communities across Brazil. In addition to their inherent hazards — 6,312 people died from electric shocks in Brazil over the last decade — these illegal connections cause great financial losses to electricity distributors, which end up bearing part of the costs of stolen energy. 

In the case of Light, its situation is linked to the geographical location of its concession in the state of Rio de Janeiro. Supplying Greater Rio means including cities marred with poverty and violence, such as Belford Roxo, Nova Iguaçu, and Duque de Caxias, as well as the city of Rio itself. The company argues that drug trafficking, among other problems, prevents it from delivering the service to the level...