October 4, 2022

The Catholic Transcript

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Eneva (ENEV3) signs agreement to merge Focus Energia (POWE3); Stocks Rise, But Close Off Highs

(Bloomberg)

iniva (com)ENEV3) and focus energy (3 . strengthOn Wednesday (15) they announced that they had entered into a business combination agreement, through which they incorporated Focus by Eneva and private placement by Eneva of the non-convertible bond notes issued by Focus.

With this process, the shares rose significantly, but were paring the gains and closing with a more modest rise. Assets ENEV3 rose 6.11%, but closed with a modest increase of 1.67% (R$ 14.65). The asset POWE3 advanced further, up 11.44% at the intraday high, but closed as high as 6.74% at R$10.92.

The process will take place through the merger of Focus by a wholly owned subsidiary of Eneva (the holding), with the extinction of Focus to be succeeded by the holding, the assignment of one new common share and one new preference share compulsorily redeemable from the holding to every 1 ordinary share issued by Focus and held By Focus contributors.

Focus shareholders (who will be Qualified Shareholders) will receive 0.189616054 new Eneva shares for each common share in the holding company they own, for a total of 17,000,000 new Eneva ordinary shares issued.

Preferred Shares of the holding company will ensure receipt in cash, on the closing date, in the amount of R$715 million total, to be updated daily through a 100% change of the DI rate between the date of implementation of the agreement and immediate action. The day before the closing date.

As a result of the operation, Hold and Focus will be terminated, with the consequent transfer of the stock base from Focus to Eneva.

The closing of the merger will be subject, among other conditions, to approval by the companies’ general shareholder meetings.

The process is expected to be implemented by April 14, 2022, with a 3-month extension.

right of withdrawal

If the merger is approved by the general corporate meetings, any dissenting Focus shareholders will have the right to withdraw, upon redemption of their shares. The redemption amount will be R$4.70 per share.

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Focus shareholders may exercise their rights of withdrawal in respect of the Fox shares they own, without interruption, between the current date and the completion date of the merger.

Shareholders opposed to Eneva will not be entitled to exercise their drawing rights.

Focus on bonds

As part of the transaction, Focus and Eneva signed, on Wednesday, the contract for the first issuance of bonds not convertible into shares of Focus, with a real guarantee, for a total amount of R$ 1.5 billion.

Today, Eneva subscribed (15) bonds amounting to 820 million Brazilian riyals, to be repaid upon compliance with previous conditions, as well as pledged to subscribe and pay the bond balance, in the amount of up to 680 million Brazilian riyals, according to the schedule provided for in the instrument.

The bond proceeds will be used exclusively to pay for some of the construction costs of the Futura project. The bonds will mature within 12 months from the date of the first payment and are payable at a cumulative change of 100% of the average daily rates of the interbank deposit – DI – one-day interbank deposit, plus an additional fee of 8% per annum.

Analytics

Bradesco BBI stresses that the process makes sense for Eneva because it has been trying for some time to enter the renewable generation sector. In terms of synergies with existing ENEVA assets, there could be an angle on the electricity/gas trade front, but the bank fundamentally believes that this move opens a new growth path in renewable energy generation, which should be among the main sources of electricity supply in the future. .

In terms of valuation, the bank says it cannot make an accurate assessment, as it does not cover Focus Energia, but the initial view is that Focus is a problematic asset, and that with its acquisition, Eneva is buying projects with solid PPAs, as well as a pipeline from Other potential projects for further growth are in the field of renewable energy.

The bank maintains a neutral recommendation of Eneva and a target price of R$ 16.00.

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