Light stock (LIGT3) is having a crash session after filing for injunctive redemption

The application was filed in the 3rd Business Court of the State of Rio de Janeiro, citing a debt of about R$11 billion, seeking to circumvent the legal ban on electric power concessionaires to resort to this system.

In a related fact, the Electricity Company stated that the challenges of its economic and financial situation have worsened despite its recent efforts to equalize it.

This, he said, requires further “urgent action”, to maintain “the maintenance of the services provided under the franchises owned by the Light Group, the continuity in strict compliance with inter-sectoral obligations, the preservation of value and the enhancement of its social function”.

The Light Group is facing a serious financial imbalance in its energy distributor, which is responsible for serving consumers in more than 30 municipalities in Rio de Janeiro, motivated by factors such as difficulties in combating energy theft and returning billionaire sums in tax breaks to consumers.

The situation worsened this year with the approaching maturity of some financial obligations and the company’s difficulty in renewing its debts in the face of doubts about renewing the distribution concession that expires in mid-2026.

Light had already obtained an injunction in the Royal Jordanian Court to temporarily suspend his financial obligations and begin mediation with creditors, resorting to new provisions of the bankruptcy law in what lawyers had previously interpreted as a “pre-judicial recovery” procedure.

The request comes to the Royal Jordanian judge despite the existence of Law 12.767/2012, which prohibits concessionaires of public electricity services from resorting to judicial or extrajudicial recovery systems.

According to two sources heard by Reuters, the company resorted to a strategy of filing for bankruptcy at the holding company, not at the energy distributor — a unit that would be subject to the legal ban and would be protected under the arrangement.

This makes it possible to maintain the electricity sector’s payment chain, which has been a source of concern for the government and regulatory agency Aneel. Power distributors are like “boxes”, they have to transfer money collected from the electricity bill to generators and transmitters, for example.

This was the same mechanism used in 2012 by Grupo Rede, which ran a chain of distributors that were later acquired by companies such as Energisa and Equatorial. It was this case that led to the approval of the law that today prevents energy distributors from filing for injunctive recovery.

To Reuters, the Secretary of State of the Civic House of Rio de Janeiro, Nicola Michoni, said that the state trusts to maintain the provision of services by Light. “We understand that, for the time being, financial problems must be resolved within the scope of the operation, through mediation with financial creditors, and that the provision of services must continue in a regular manner to the population of Rio de Janeiro, industry, and services,” Michoni said.

The alternative should Light fail to achieve judicial recovery or agree with creditors would be Aneel’s intervention. However, this could be “painful” for the company, according to the former Light CEO and interventionist in the Grupo Rede case.

Mines and Energy Minister Alexander Silvera said this week that Light had not provided “responses to rise” on its management efficiency, and stated that the government would not allow companies without effective management to participate in the distribution contract renewal process. – something crucial to the continuity of the company.

(with Reuters)