BMI View: We maintain that the Brazilian electricity market will offer opportunities to risk-tolerant project developers and power sector investors over the coming years, despite the country's deepening economic recession in 2016. The renewables and hydropower sectors will present the biggest potential to international investors, but we see opportunities also in power transmission and distribution. We also highlight, however, that lower power consumption, coupled with high financing and import costs will be significant risks to operating in the country in the short run.
|e/f = BMI estimate/forecast. Source: National sources, BMI|
|Generation, Total, TWh||554.650||572.650||588.910||600.940||617.150||627.960||646.280|
|Consumption, Net Consumption, TWh||501.8||481.7||493.3||505.6||519.8||534.3||550.3|
|Capacity, Net, MW||138,496.9||151,339.5||158,014.5||162,669.0||171,882.9||174,820.4||178,250.1|
Latest Updates And Structural Trends
Brazil's economic crisis has started to reduce investment in new power projects and to threaten the implementation of those already planned, as a result of a contraction in power consumption and higher financing and import costs for project developers. These factors - coupled with an ongoing investigation on state-run utility Eletrobras, which could result in delays and asset impairments - have brought us to downgrade our forecast for growth in the natural gas, renewables and nuclear power sector this quarter.
We expect weaker growth in Brazil's natural gas-fired power generation in 2016 and through 2025 as a result of both greater hydropower generation and market dynamics. In particular, in a context of lower power consumption - due to weaker economic growth - our projections for growth in hydropower and renewables generation indicate that Brazil will need to rely less on thermal power generation than we had previously expected. Supporting this view, only one gas-fired power project was contracted at Brazil's latest A-5 New Energy auction, held in April.
We maintain a relatively positive long-term outlook for Brazil's renewables sector, due to continued government support for the industry and resilient investor interest. However, this quarter we have seen the first negative impacts of the country's economic crisis on the wind and solar power sectors. No wind power projects were contracted in April at the A-5 energy auction, despite a large number of projects had been registered ahead of the tender. Moreover, also in April, Brazilian and international project developers accounting for the majority of the solar capacity contracted in 2014 asked to postpone the date in which their projects are supposed to start operations, from 2017 to 2019. The companies said that the slump in the Brazilian real and lack of local supplies have made the project development economically unfeasible.
The interim government of Michel Temer, who is holding the presidency while President Dilma Rousseff stands an impeachment trial, has announced it will scale back government interventions in the Brazilian power market. In contrast to the interventionist approach of the first Rousseff government, the Temer government has reportedly committed to pursuing a market-driven approach for the electricity industry. This includes reducing the market's dependence on the subsidised financing provided by the Brazilian development bank BNDES, although the new BNDES management has stated that renewables will remain a priority.
Eletrobras' strategy and finances will be impacted by the implications of its alleged involvement in the Lava Jato corruption scandal. While we highlight that investigations are still ongoing, any write-downs on assets' value would weigh on Eletrobras' heavy debt burden and the struggling finances of many of its power distributions subsidiaries. We expect the company to remain committed to privatising some of its power distribution, transmission and generation assets.
In May, Eletrobras announced that it would miss a deadline to submit to the US Securities and Exchange Commission (SEC) its financial reports for 2014. As a result, the New York Stock Exchange suspended the US trading of Eletrobras's shares and initiated the process for delisting the company. The government has announced that it is not planning to recapitalise the utility.
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.
- Target business opportunities and risks Brazil's power sector through our reviews of latest power industry trends, regulatory changes, and major deals, projects and investments in Brazil.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Competitive Landscape analysis.
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).