Brazilian energy company Light files for bankruptcy protection

Photo: Shawn Eastman Photography / Shutterstock

Light S.A., a holding group that owns energy generation and distribution companies, has filed for bankruptcy protection at a Rio de Janeiro business court, citing gross debts of BRL 11 billion (USD 2.24 billion).

The utility company said that despite its recent efforts, the challenges of its economic and financial situation have worsened and that the current scenario requires “urgent” measures to maintain the services provided under its concessions, comply with intersectoral obligations, preserve value, and fulfill its social function. The holding company controls Light SESA, which distributes electricity to 31 cities in the state of Rio de Janeiro by way of a concession agreement with the state government.

In Brazil, according to Law 12.767/2012, energy concessionaires are not allowed to resort to judicial or extrajudicial reorganization. However, Light S.A. is not a concessionaire per se. Experts say that the holding company took the decision precisely because its subsidiary could not. Furthermore, Veja magazine reports that Light has encountered some confrontational creditors which have so far refused to engage in productive negotiations.

Nicola Miccione, chief of staff in the Rio state government, told Reuters he is confident that Light will continue to provide services.

Light’s revenue structure is peculiar due to the location of its concessions, as Rio de Janeiro has high loss and default rates. According to the company, socioeconomic adversities — such as poverty and organized crime — prevent it from meeting the operational indicators set out in its contract with the state government.

In April the holding obtained an injunction temporarily suspending its financial obligations for 30 days while it entered into talks with creditors, and resorted to new provisions of Brazil’s bankruptcy law. The stay expired yesterday, but it can be extended for another 30 days. In addition to advancing negotiations with its creditors, Light has also sought to anticipate the renewal of Light SESA’s concession contract with energy regulator Aneel in better financial conditions than the company has today — the agreement expires in 2026, but the company has until June to show interest in renewing.

Maria Luiza Dourado

Maria Luiza is a business and tech reporter. She has been published by Pequenas Empresas & Grandes Negócios, TC, and Olhar Digital, and has experience in real-time coverage of financial markets.