EXCLUSIVO. Equatorial quer vender a Echoenergia, sua empresa de renováveis

Equatorial Energia is exploring the sale of its renewable energy subsidiary, Echoenergia, according to sources familiar with the matter, according to Brazil Journal. The deal is still in the initial stages, with potential buyers such as Engie preparing for due diligence on the assets, sources said. Equatorial entered the renewable energy sector with the acquisition of Echoenergia in 2021 for an enterprise value of R$ 10 billion.

Although known for being one of the best capital allocators in the energy sector, Equatorial "paid a high price" for Echoenergia and witnessed the renewable industry enter a long crisis afterward, a source said about the sale decision. Since 2023, wind and solar farms have been facing forced production cuts due to an oversupply of energy in the system, which has affected the revenue of sector companies and driven away investments.

The issue, known as curtailment, was not a concern until then - shortly before, the sale of Echoenergia by its previous parent, Actis, attracted offers from over 10 interested parties when the renewable energy market was booming in Brazil. With the crisis in the sector, Equatorial has been probing potential buyers for isolated assets of Echoenergia for about two years, but failed to close a deal mainly because curtailment makes it difficult to agree on a price.

Recently, the government published a decree regulating a partial compensation for losses due to cuts, after a law passed last year opened this possibility. This regulation could facilitate the resumption of M&As in renewables, but still, "it is very difficult to reconcile price," a market source said. If successful in selling Echoenergia, CEO Augusto Miranda could reduce the company's leverage, which is currently close to 3x EBITDA, and refocus efforts and investments in distribution and sanitation businesses.

One of the opportunities on the company's radar is a potential acquisition of Enel São Paulo if the Italian group decides to sell its concession due to pressures from politicians and regulators after blackouts in its operating area in 2023, 2024, and 2025. For Engie, the opportunity would fit its strategy to evaluate opportunistic M&As of renewable assets with long-term power sales contracts. Equatorial is valued at R$ 43 billion on B3. The stock has fallen about 4% in 2026.