EDP Brasil cuts dividends because of Covid-19. EDP will earn less

  • ECO News
  • 27 March 2020

The alteration will be voted by the shareholders on March 31st, but will have to be approved as the largest shareholder is EDP.

EDP Brasil has cut by almost half the dividends it will deliver to shareholders due to the coronavirus. The electric power company, which is owned by the Portuguese company EDP, decided to reduce shareholder remuneration as a measure to prevent financial capacity, due to the uncertainty caused by the Covid-19 pandemic.

The EDP Brasil management communicated to the Brazilian market supervisor a new proposal for deliberation at a general meeting of shareholders. It now proposes to distribute dividends of 353.5 million Brazilian reals (equivalent to approximately 63.6 million euros) referring to 2019, below the 604.8 million Brazilian reals (109 million euros) previously proposed.

“In view of the current Covid-19 pandemic scenario, and the uncertainties as to its impacts on EDP’s business,” the amendment was deliberated “aiming at preserving the cash position and maintaining the company’s financial health.”

The amount represents a payout of 27.8% of profits, compared to the previous proposal for distribution of 47.59% of net income. “The company’s management clarifies that the above mentioned alteration will not prejudice the right to receive the minimum mandatory dividends foreseen in its by-laws, of 25% of the adjusted net profit of each fiscal year,” it underlines.

The proposal will be voted by the shareholders at the extraordinary general meeting that will take place on March 31st, but it is almost certain it will be approved given that the largest shareholder is EDP (with 51% of the capital).

In view of the downward revision, the parent company should receive 180.3 million Brazilian reals (32.5 million euros), after having received 242.8 million Brazilian reals (43.7 million euros) last year.

The decision was taken on the same day that the general shareholder meeting of EDP Renováveis (also held by EDP) approved a profit distribution of 69.8 million euros. The amount corresponds to a dividend of eight cents per share and means that there were no changes to the proposal.

EDP itself may still review the shareholder remuneration policy, but the electric administration has more time to change the proposal since the general meeting is scheduled only for April 16th. For now, the company led by António Mexia plans to maintain the value of the dividend at 19 cents per share.