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Now, the Former Odebrecht Will Rely on OEC, A Company Focused on the Construction Sector, as Its Core Business
A year and a half ago, the Odebrecht group, founded by Norberto Odebrecht, changed its name to Novonor in order to distance the company from the controversies related to the Lava Jato Operation, which triggered the start of its decline. Now, the company, which still has the same owners, has changed all its leadership and is seeking a way out of the judicial recovery process, with debts exceeding R$ 100 billion.
According to the new management of the company, the scenario is favorable for a recovery, although it is still far from the parameters before the corruption scandals. The president of Novonor, Hector Nuñez, took office in March and claims that when he arrived, the path was already paved, with the judicial recovery approved and the leniency agreements in place, allowing for a fresh start and a focus on the future.
Nuñez also states that the company has fulfilled its duties in terms of governance, as well as dedicating itself to structuring compliance processes.
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The impacts of Lava Jato caused Novonor to reduce its workforce from nearly 130 thousand employees to just 30 thousand today. According to the company, the recession faced by Brazil since 2015 also had consequences for its business.
In this regard, Maurício Cruz Lopes, president of OEC (the new brand of the former Odebrecht Engineering and Construction), explains that the construction sector goes through various cycles, whether high or low.
OEC Will Take the Place of Petrochemical Braskem, Which Is Up For Sale
OEC will replace petrochemical Braskem, now becoming the core business of Novonor. The construction arm of the company had a revenue of US$ 500 million last year, which is far from the US$ 10 billion earned at the beginning of the last decade. However, Lopes argues that there is a growth trend, with this year’s revenue expectation between US$ 1.1 billion and US$ 1.2 billion.
Hector Nuñez emphasizes that OEC no longer aims to become the largest contractor in Brazil, nor to compete for concession contracts, which require billion-dollar investments for both construction and government grant fees.
Currently, the company intends to operate solely as a partner to winning companies in the construction sector. It has 22 projects underway, the largest being the Laúca hydroelectric plant in Angola. In Brazil, there are 11 ongoing projects, including Prosub, a nuclear submarine program, and the gas terminal in Babitonga, Santa Catarina.
The construction sector is experiencing a very different context than it did ten years ago. During this period, the infrastructure’s share of the country’s GDP has fallen by 50%. However, according to Ana Castelo, the coordinator of construction projects at FGV Ibre, there is hope for improvement in this scenario over the next few years, considering the new federal government concessions.
Castelo also sees the possibility that Novonor could benefit from this market, even though its image recovery is far from complete. She adds that the company will have significant work to do, needing to demonstrate that its rules are transparent and that its compliance system is strong.
Novonor Initiates Process to Sell Several Companies to Enable Its Judicial Recovery
In this regard, it is crucial for the company to pay its judicial recovery creditors. Only in this way will the former Odebrecht regain access to more lines of credit, although its president denies any problems in obtaining financing.
Thus, to settle its debts, Novonor will need to sell several of its companies. Braskem, for example, valued at R$ 30 billion, is expected to exit the business through the stock market in the coming months.
Ocyan, an oil and gas company, and OTP, responsible for consolidating Novonor’s road concessions, have also hired banks to begin seeking buyers. Additionally, the group has already sold Odebrecht Ambiental and Atvos (formerly Odebrecht Agroindustrial).
Despite all the planning aimed at the company’s evolution, Novonor is still facing challenges related to its past. For instance, there is the payment of the leniency agreement signed in 2018, totaling R$ 2.7 billion.
This is the largest agreement among construction companies involved in Lava Jato. So far, about R$ 150 million has been paid, which is 5.5% of the total fine.
Finally, Nuñez emphasizes that the disputes involving the Odebrecht family, the controlling entity of Novonor, and the business operations have been resolved, with no more influence on the company’s daily affairs.
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