Bonds & Loans: How are CFOs developing their 2019 CAPEX and investment strategies taking into account increased global and domestic uncertainty?
Raul Cadena: Uncertainty has definitely been more present in everyday decision making. CFOs have to analyse investment opportunities through multiple angles. Calculating returns in shorter horizons or running multiple risk scenarios in approaching investments are some ways one can improve decision making. Today, a single “average” return in a fixed timeframe does not make sense anymore. Instead, one should (i) be prepared to take decisions in a range of multiple returns and probabilities, (ii) have the ability to understand key value/risk drivers that might take you to one end or the other of the range, and (iii) proactively manage the value/risk drivers in order to get the expected returns.
Bonds & Loans: Can you give us a sense of the company’s key strategic focus areas over the next 6-12 months?
Raul Cadena: Votorantim Energia will continue to focus on (i) energy generation growth both through M&As and development of greenfield renewables projects, mainly through its joint venture with CCPIB, and (ii) energy trading and services to its customer base in the energy market in Brazil.
Bonds & Loans: What are Votorantim Energia’s funding plans over the coming months? If you are looking to borrow, what format, size and tenors is the company looking at?
Raul Cadena: Our funding needs might come from our energy generation growth plan. In M&As, we might look for 5 to 7-year debt instruments in local currency to improve or restructure the potential targets’ balance sheet. In our greenfield projects, we might be looking for longer term debt instruments, 12 to 16 years, in local currency as a project finance.
Bonds & Loans: What is the mix between local and hard currency funding at Votorantim Energia’s currently? Are there any plans to adjust the mix in light of the new administration and increased international investor appetite into Brazil?
Raul Cadena: Our main demand is in local currency since all of our revenues are in BRL.
Bonds & Loans: Following the acquisition of the controlling stake in CESP towards the end of 2018, how are Votorantim Energia looking forward to 2019 and beyond in terms of their capital markets activity?
Raul Cadena: The acquisition of CESP though our JV with CPPIB really changed the game for us. Our JV now has 2.2GW of power in the energy business in Brazil. Our focus this year will be on value creation at CESP, especially in the first semester of 2019. However, we will continue to focus on growth through M&As and greenfield projects. We believe that the energy market in Brazil in the next couple of years will present opportunities for growth.
Bio: Raul Cadena
Raul Cadena, is the CFO at Votorantim Energia. Raul joined the company in 2014, being responsible for the finance area and M&A. In the last four years, Votorantim Energia became a relevant player in the generation and energy trading businesses. The company grew its energy generation business and recently announced a joint venture with CPPIB with 2.2 GigaWatts of operating wind and hydro power plants in the regulated and free markets and has ambitious growth plans. Votorantim Energia has also grown its energy trading business and is one of the top 3 largest trading companies in Brazil. The company also owns relevant equity participations in an additional 700 MW of hydro power plants.
Before joining Votorantim Energia, Raul worked for two years in portfolio strategy for Votorantim SA. He has prior experience in areas such as marketing, operations and strategy in companies such as Usiminas, Oi and The Boston Consulting Group (BCG).