Eneva: Capacity auction at risk? Enhanced Buy opportunity emerges amid political noise

Research evidence excerpt

Eneva: Capacity auction at risk? Enhanced Buy opportunity emerges amid political noise

decision, the 52-Week Range 13.00 BRL - 28.12 BRL

court acknowledge the importance of the auction for the system reliability. Mrkt Val (mn) / Shares Out 46,894 BRL / 1,937.0

MME view: positive stance on the outcome (mn)

As we have previously written (see Meeting Feedback with MME), the Energy Ministry Free Float 73.4%

remains constructive on the capacity auction homologation despite TCU scrutiny, Average Daily Value (mn) 53.72 USD

supported by 1) prior oversight of price-cap methodology, 2) the role of winning BofA Ticker / Exchange XZUMF / SAO

thermals in the grid’s reliability, and 3) the risk that non-homologation to trigger much Bloomberg / Reuters ENEV3 BZ / ENEV3.SA

costlier emergency contracting (>5x current contracts) + tariff pressure and import risks. ROE (2025E) 8.1%

Noise: enhanced Buy opportunity for Eneva (14% IRR) Net Dbt to Eqty (Dec-2024A) 66.9%

Our base-case still assumes homologation of the capacity auction despite higher short-

term legal + political noise, as 1) Brazil’s structural need for dispatchable thermal ANEEL = Brazil’s regulatory agency

capacity remains clear, 2) cancelling the auction would increase institutional risks and TCU = Brazil’s Accounts Tribual

the sector’s cost of capital and 3) a new emergency contracting process would likely

occur under worse economics and higher consumer costs. Importantly, the government MME = Ministry of Energy

could still move forward despite TCU’s final recommendation, while MME’s revised

ST = Short-termprice-cap came broadly fair and in line with our own greenfield TPP calculations based

on recent capex/opex market figures (see The price of power security).

Maintain Buy with R$31/sh PO (~30% potential upside)