Eletronet has enough cash for only 20 more days

Eletronet has enough cash in hand to survive only another 20 days, says José Eudes, president of Lightpar, the telecoms network?s parent company. Imminent financial collapse is one of the reasons for the Government?s decision to declare bankruptcy, although this has to be ratified by an extraordinary general meeting of shareholders scheduled for April 14. ?It?s impossible to keep the patient alive on artificial respiratory support any longer,? says Luiz Pinguelli Rosa, president of Eletrobras, which controls Lightpar. Eletronet is losing some 4.2 million Brazilian Reals per month (now about 1.2m US Dollars). ?Running costs work out at about 6m BRL and revenue only 1.8m BRL per month,? he explains.
Lightpar owns 49% of Eletronet. The remaining 51% formally belongs to U.S.-based energy company AES but the Government controls Eletronet in administrative terms and has borne all the capex incurred to date, diluting AES? position.
Debts

Luiz Pinguelli Rosa also categorically rules out any possibility that Eletrobras will assume Eletronet?s debts to suppliers, estimated at 550m BRL owed mainly to Furukawa and Lucent. The shareholder agreement under which Eletronet operates states that AES is solely responsible for the network?s debts. ?Furukawa and Lucent are knocking on the wrong door if they want to collect from us,? he says, alluding to press reports that the vendors would rather the Government took responsibility for Eletronet?s debts.
Three potential buyers have emerged in recent months, Mr Rosa says, declining to name names. Well-informed sources say bids have been put on the table by Comsat, Nelson Tanure and GP Participações. AES would have to sell its holding for a token amount (1 BRL) and count itself lucky to hand the debt off to the buyer. The debt assumption issue has been the stumbling-block to any deal so far.
Operation continues
Eletronet will continue to operate even if the shareholders vote for bankruptcy on April 14, Mr Rosa guarantees. ?The court will appoint a bankruptcy trustee. The Government doesn?t want Eletronet to cease operating,? he stresses. Most of the network?s monthly deficit isn?t operational but financial. Eletrobras itself uses some of Eletronet?s data transport cables and has no interest in shutting the network down.
Eletronet?s 13,000-kilometer network accompanies Eletrobras?s electric power transmission lines. Its customers are telecommunications carriers that lease fiber-optic capacity from the network. Its financial problems are partly due to oversupply of backbones for data transport and the resulting fall in prices for leased capacity. A large percentage of the network is currently idle.