Communication

Releases

Odebrecht S.A. continues to make progress on its plan to divest assets, restructure debt and strengthen the capital structure of certain businesses. The goal is to ensure its financial liquidity in the context Brazil’s prolonged economic crisis and the instability in certain industries in which it operates, such as sugar and ethanol and oil and gas. One of the actions contemplated by the plan is the divestment of assets worth approximately US$3.6 billion (R$12 billion) by mid-2017.

The results have been positive. In July 2016, the Odebrecht Group closed negotiations to strengthen the cash position of Odebrecht Agroindustrial, its sugar and ethanol arm. The company’s debt was among the largest in the Group, given the prolonged period of repressed fuel prices that put ethanol at a disadvantage. The restructuring included the company’s capitalization by Odebrecht S.A. in the amount of approximately US$1.8 billion (R$6 billion): US$600 million (R$2 billion) via the payment of renewable energy assets and US$1.2 billion (R$4 billion) via a capital injection, US$1.2 billion (R$2.5 billion) of which was used specifically to immediately amortize the debt of Odebrecht Agroindustrial to align its leverage with its cash generation. This initiative reaffirms Odebrecht’s clear confidence in the industry and the vital role that ethanol plays as a renewable energy source in Brazil.

Odebrecht completed important negotiations in the process to divest its assets. In October 2016, Odebrecht S.A. announced the sale of a 70% interest in Odebrecht Ambiental, its sanitation business, to Brookfield Brazil Capital Partners LLC and BR Ambiental Fundo de Investimentos em Participações. The fund FI-FGTS holds the remaining interest of 30%. The sale price was US$878 million. The units Cetrel, Ecosteel Gestão de Águas and Ecosteel Gestão de Efluentes Industriais in the industrial water treatment division are the focus of independent negotiations with other interested parties and will generate additional liquidity. Odebrecht S.A. will continue to prospect environmental projects in South America (excluding Brazil) and Africa.

In June 2016, Odebrecht Latinvest, which owns concessions in Colombia and Peru, signed an agreement for the sale of 57% of the Rutas de Lima Highway Concession in Peru to the global asset manager Brookfield. With the sale, Brookfield became the majority shareholder, with 57%, while Odebrecht Latinvest now holds 25% and Sigma maintains its 18%. In November, Odebrecht Latinvest concluded the sale of 100% of its interests in Concessionaria Trasvase Olmos S.A. (CTO) and H2Olmos S.A., the irrigation concessions of the Olmos Project in Peru, to Brookfield Infrastructure and Suez.

In October 2016, Odebrecht Energy announced the sale of Odebrecht Alternative Energies, which owns the Corredor do Senandes Wind Power Complex in Rio Grande, Rio Grande do Sul, to the NC Group. The sale follows the complex’s construction and implementation and enabled the capture of gains from an asset that is 100% operational after investment of around US$119 million (R$400 million). Odebrecht Energy continues to negotiate with corporate groups in a bid process to divest its 28.6% interest in the company Santo Antônio Energia (18.6% directly and 10% through the FIP Amazônia Fund).

The Odebrecht Group continues to seek buyers for a hydroelectric plant and gas pipeline in Peru and is negotiating the sale of its interest in an oil block in Angola, among other continuing operations. To date, the company has completed sales worth approximately US$1.5 billion (R$5 billion). The negotiations also led to a further reduction in the Group’s gross debt of US$1.7 billion (R$5.7 billion).

Debt held by Companies

The Odebrecht Group’s businesses are separate entities that operate in different industries with distinct partners, each with their own leadership and in various maturity stages. Debt is recorded at each company, primarily in connection with the projects in which they each hold interests. Under this “project finance” structure, creditors evaluate and finance each project, whose cash is then recorded separately with the revenues used to secure repayment.

Given the current scenarios of the Brazilian and world economies, Odebrecht S.A. and its companies have not entered into new projects since 2014, thereby reducing the need for new financial resources.

In addition to the capital restructuring of Agroindustrial, Odebrecht Oil & Gas continues to negotiate with holders of the bonds issued by its subsidiary Odebrecht Offshore Drilling Finance Limited, which was affected by the termination of the charter and operating contract for the ODN TAV IV offshore drilling unit by Petrobras in September 2015. The unit and the three other drill ships comprise the group of assets, currently valued at US$2.041 billion, that serves as collateral for these bonds. The global Oil & Gas sector has suffered from the drop in oil prices.

Results and Challenges

Despite the current challenges, Odebrecht S.A. posted gross revenue of US$37.8 billion (R$126.6 billion) and EBITDA of US$6.9 billion (R$23.1 billion) in June 2016 (last 12 months). Revenue from the operations outside of Brazil accounted for 58% of total inflows, demonstrating the Group’s important international presence due to its overseas earnings.

In April 2016, Braskem inaugurated the Ethylene XXI Petrochemical Complex in Mexico, the largest petrochemical complex in Latin America, which uses natural gas as feedstock, whose supply is secured by a 20-year contract with Pemex, Mexico’s state-owned oil and gas producer.

Since 2015, Odebrecht Engineering & Construction International has won important contracts for projects such as Highway 836 in Florida, Line 2 of the Panama City Subway, the first subway line in Quito, Ecuador, the reurbanization of Colón, Panama and the Laúca Energy Transmission Line and Naval Base in Angola.

“We are currently carrying out a review to better organize our concepts, policies and guidelines. We have faced other crises in the past that have led us to revise our operational areas. Once this stage has passed and we have turned the page, we will be prepared to face the challenges of the future,” said Newton de Souza, CEO of Odebrecht S.A.

* Based on the exchange rate at the close of trading on Nov. 22, 2016: US$1.00 = R$3.3476.