The amount will be distributed in three equal installments of 22 billion Kz for ENDE, PRODEL, and RNT. The bonds will be divided into units valued at 1,000 Kz each, with an interest rate of 15% per year. These are merely “pills” for a sector that needs a more complex surgery to stay alive.
Three executive decrees published on the last day of January authorize the issuance of Treasury Bonds specifically for the recapitalization of ENDE-EP, PRODEL-EP, and RNT-EP. Each will receive 22 billion Kwanzas, with a maturity of 2 years and semiannual interest payments at a rate of 15% per year. According to the decrees, each unit bond is valued at 1,000 Kz and will be issued at face value, without discount, through a registry of ownership with the National Bank of Angola (BNA).
The issuance date is still pending, but the bonds will be processed automatically through the Asset Market Management System (SIGMA), which will manage the issuance registry, interest payments, and redemptions according to the conditions established in the General Bond approved by these decrees. Operationally, the decree also defines that the amounts will be directly debited from the Treasury’s Single Account, with prior notice to the National Treasury Directorate, to be credited to the deposit accounts of the institutions responsible for settling interest payments and redemptions on the respective due dates, upon proof of the final redemption to the beneficiary holders by these institutions.
The BNA is also tasked with establishing the rules for procedures to be followed by financial and intermediary institutions so that these bonds can be traded on the secondary and interbank markets, with discounts limited to market rates and collateralized as loan guarantees.
The success of this operation is closely linked to the bond’s profitability, as a 15% annual rate when the country is experiencing an inflation rate of 27.5% and with a strong possibility of Kwanza devaluation during this period, makes the bonds, which are in local currency, unattractive for both citizens and banks. However, since the national financial market offers few alternatives for savings investments, it is possible that these bonds, due to their specific purpose which is well known, may still see some demand.
Electricity Sector
The stability of the sector is under significant pressure due to the worrying situation at ENDE, which ultimately affects the other two companies upstream. For example, according to calculations made by Expansão regarding the 2023 accounts, the latest available, ENDE has a debt to RNT exceeding 400 billion Kz, which, although not reflected in equity and results, heavily impacts RNT’s cash flow. This then leads to serious management issues.
Among the three companies, ENDE is the only one with negative equity (in technical bankruptcy), which has been growing alarmingly in recent years, already reaching -234 billion Kz (see graph), but all of them are facing difficult cash flow situations, which justifies this cash injection, since there are currently no long-term solutions for the sector. Despite frequent mentions of ENDE’s customer debt, valued at 294 billion Kz in 2023, the truth is that the company’s debts already amounted to 532 billion Kz.
A significant portion of this debt package will never be received by ENDE, so the only way to alleviate the situation is through capitalization by the shareholder, in this case, the State. This has been happening annually, meaning that these 22 billion Kz are incredibly insufficient for the company’s needs. As the administration of ENDE stated in the 2023 R&C: “With the results obtained at the financial management level, it is a fact that the company has no cash flow (lack of liquidity) to meet its short-term commitments and has increasingly financed itself with the debt of its main suppliers and creditors, incurring additional costs due to debt updates, interest application, and other penalties, which has led the company to a state of insolvency and technical bankruptcy.”
One possible solution to resolve ENDE’s problem, while also opening the sector to private investment, could be the integration of the three companies into a single structure, which would clean the balance sheets and create a single entity with positive equity and the possibility of reporting positive operational results. Of course, the procedural issue for this merger is quite complicated and would require a thorough analysis of how it could work in the future, to avoid “killing” the sector’s operationality. This is especially important considering the very different cultures and operating methods of the three companies.
Source: Expansão
