BMI View: , With the economy returning to growth in 2017 and the government committed to attracting investment in the power and renewables sectors, t he Brazilian electricity market will offe r opportunities to project developers and power secto r investors. Wind, solar and natural gas will present the biggest potential to international investors, but we see opportunities also in power transmission and distribution via public tenders and the acquisition of local distribution companies . That said, weak power consumption and delays in project implementation due to high financing and import costs will remain pertinent issues over the coming quarters.
|e/f = BMI estimate/forecast. Source: National sources, BMI|
|Generation, Total, TWh||554.650||572.880||589.080||601.140||617.360||628.180||646.510|
|Consumption, Net Consumption, TWh||501.8||486.7||498.4||510.9||525.2||539.9||556.1|
|Capacity, Net, MW||138,497||151,644||158,098||162,764||171,985||174,929||178,365|
Latest Updates And Structural Trends
The constrained financing environment and currency slump that characterized Brazil's economic recession in 2015-2016 are having an impact on the growth outlook of the country's power sector. In August it was reported that the Brazilian government is likely to cancel the 2016 A-3 auction for new power projects, after delaying a reserve auction for wind and solar to December. Moreover, it is reportedly considering cancelling power purchase agreements for some solar and natural gas projects contracted in 2014-2015 that are unlikely to be developed under current macroeconomic conditions, in order to allow them to participate in future auctions.
Despite current hurdles, we believe Brazil will offer opportunities for power project developers over the coming quarters, particularly in the renewables sector. Due to the risk that contracted projects do not come online as scheduled, the government is planning to hold a number of auctions in 2017 to secure power supply over the next few years. The large number of solar and wind projects registered to compete in the December auction indicates that investor appetite for the market is still significant.
Our constructive outlook for the market over the long term is supported also by the expectation that the economic environment will start to recuperate in 2017. In August, the Brazilian Senate voted 61 to 20 to impeach President Dilma Rousseff, concluding the major source of political uncertainty in the country. Our Country Risk team believe that Brazil's recession has bottomed and expect growth to turn positive in 2017. That said, a more robust economic expansion will remain out of reach as long as the country's political climate precludes deeper structural reforms.
In order to ensure greater attractiveness to investors and certainty that the power projects contracted come online timely, the ministry of energy announced in late August that energy auctions - starting from the second reserve auction scheduled for December 2016 - will be held under new guidelines. The government will consider power transmission capacity when contracting new projects, in order to minimise the risk of delays in implementation and increase transparency.
In August 2016, Brazil's state-owned utility Eletrobras was forced to postpone again the sale of its stake in its biggest power distribution unit, Celg-D, as no bid was submitted for the company. Although a number of international companies had previously shown interest in acquiring the distributor, it appears that the initial bid price set by the government was too high. In addition to Celg-D, Eletrobras plans to sell six of its power distribution subsidiaries in 2017, in order to reduce its debt load and focus on the power generation business.
The Brazil Power Report features BMI Research's market assessment and independent forecasts covering electricity generation (coal, gas, oil, nuclear, hydro and non-hydro renewables), electricity consumption, trade, transmission and distribution losses and electricity generating capacity.
The Brazil Power Report also analyses the impact of regulatory changes, recent developments and the background macroeconomic outlook and features competitive landscapes comparing national and multinational operators by sales, market share, investments, projects, partners and expansion strategies.
- Use BMI's independent industry forecasts for Brazil to test other views - a key input for successful budgeting and strategic planning in the power market.
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BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis, covering power markets, regulatory changes, major investments, projects and company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the power sector and within the broader political, economic and business environment.
BMI’s Power Forecast Scenario
Forecasts to end-2024 for all key indicators, supported by explicit assumptions, plus analysis of key downside risks to the main forecasts:
- Generation: Electricity generation total, thermal, coal, natural gas, oil, nuclear, hydropower, hydro-electric pumped storage and non-hydropower renewables.
- Transmission and Distribution Losses: Electric power transmission and distribution losses.
- Trade: Total imports and exports.
- Electricity Consumption: Net consumption.
- Electricity Capacity: Capacity net, conventional thermal, nuclear, hydropower and non-hydroelectric renewables.
BMI’s Power Risk Reward Index
BMI’s Risk Reward Indices provide investors (power companies, service companies and equity investors) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors,
Structure, size and value of the industry sector; overview of the industry landscape and key players; an assessment of the business operating environment, sustainable energy policies, pricing and the latest regulatory developments.
Key Projects Database
Details and analysis of all current and planned developments (new ventures, capacity expansion and other investments) across the sector broken down by location, sector type, capacity, value, companies and operational status.
Illustration of the power industry that exploits our data-rich, in-depth analysis of the leading players in the sector and examination of operational results, strategic goals, market position and the potential for investment.
Power Outlook long-Term Forecasts
Regional long-term power forecasts covering electricity generation, consumption and capacity for thermal, hydroelectric and nuclear power. These are supported by a country specific overview, alongside an analysis of key downside risks to the main forecasts.
Providing BMI’s near-term economic outlook for the region as a whole, as well as taking a close look at countries of particular interest and the latest trends and developments.
The Power Market Reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports, including Energy Information Administration (EIA), World Bank (WB) and United Nations (UN).