HOW WERE THE SALE OF THE DAMAGES STRUCTURED
Two days before the buyer’s choice for the dams was announced, the consortium led by Engie founded the company on December 17, 2019 in Portugal Deep watersa vehicle that would later be used to procure hydroelectric power plants.
On the EDP side, on August 25, 2020, the Portuguese group went ahead with the project to build the six dams owned by EDP - Management of energy production🇧🇷 Already then, the demerger project, published on the Justice Portal, identified the future company to be created to absorb these assets: Camirengia Hidroeletricos SA🇧🇷
This split means “highlighting the assets allocated to the autonomous business units,” with respect to the six hydroelectric developments. The assets, liabilities, contractual positions and tax positions of each of the dams would pass to the new company, Camirengia.
The spin-off project stated that “given the multiplicity of contractual positions, mandatory rights, legal and employment relationships, administrative and contractual licenses and protocols, especially with respect to the divisional branches of activity, the planned spin-off is subject to the principle of universal transfer of rights and obligations, presents itself as the operation which, from a legal point of view, proves to be the simplest and most linear to achieve the intended goal”.
If the sales model was legally established (distribution of the assets of EDP Produção to a new company, which would be sold by the buyer consortium to the newly created company), EDP still had to wait for permission to license the concessions of the water domain, which required a green light was from the Portuguese Environmental Agency (APA).
In November 2020, the Ministry of the Environment, led at the time by João Pedro Matos Fernandes, announces the approval of the transfer of the hydroelectric development concession, with a favorable opinion from the APA. This leads EDP to create Camirengia on December 16, 2020 (the company was already foreseen in the August spin-off project). The next day, December 17, EDP informs the market that the sale of the dams has been completed.
On December 18, Camirengia Hidroelétricos SA registers amendments to the Articles of Association and the manager chosen by Engie to lead the project, Bertrand Fauchet, becomes Chairman of the Board of Directors. In the following days, the consortium led by Engie issued bonds and a capital increase in the company Águas Profundas SA (established a year earlier), changing the name of the company to Movhera I – Hydroelectric power stations in the north🇧🇷
Movhera I would eventually acquire Camirengia (the company set up by EDP to own the six dams and sold to the French consortium), but the deal would not close until early 2021. On January 25 of that year, Camirengia, already owned by the French, registered the project to be included in Movhera I.
On March 2, Camirengia will change its name to Movhera II and on March 3, 2021 it will finally be incorporated into Movhera I. The process is complete, also on the buyer’s side. But the deal would still spill a lot of ink.
TAX ESCAPE ACTION
The sale of the dams sparked heated debate over whether the transaction was set up to avoid paying taxes. The objection mainly came from the Miranda Land Cultural Movementinterested that an operation of that magnitude could actually bring benefits to the northeastern region of the country.
The Terra de Miranda Cultural Movement, founded in 2020, came to defend that the dam trade was accompanied by counterparts for the Miranda do Douro region. The group originated with a manifesto, initially signed by a group of nine associations and more than a dozen individual signatories, including José Maria Pires (university professor and tax manager at the Tax and Customs Administration’s Center for Fiscal and Customs Studies). Aníbal Fernandes (former CEO of the wind consortium Eneop, in which EDP was a shareholder).
And in November of that year, after the government gave the “green light” to the operation between EDP and Engie, the same movement expressed concern that closing the transaction as late as 2020 could lead to the ineffectiveness of a mechanism approved in the vote on the state budget for 2021, which, among other things, transferred the proceeds from the stamp tax on the transfer of dams to an autonomous fund, with an estimated amount of more than 100 million euros.
In December, the cultural movement Terra de Miranda returns to taxation, classifying the dam activities as “an aggressive tax planning operation, resulting in an exemption from all taxes affecting a transfer of 2.2 billion euros”. On that occasion, the movement recalled that in September it had warned the Ministry of the Environment about the possibility of the companies involved using tools to evade taxes. and also the Left block would target batteries to the drafts trade.