BMI View: T he Brazil ian electricity market will offer several business opportunities to project developers and power sector investors over the coming quarters , despite a worsening of the country's economic recession in 2016 . The renewables and hydropower sectors will present the biggest upside to international investors in terms of scale, but we see opportunities also in power transmission and distribution. That said, we maintain that high interest rates and continued currency weakness, coupled with a corruption investigation into state-run energy companies, will keep the power sector's growth below its full potential.
|e/f = BMI estimate/forecast. Source: National sources, BMI|
|Generation, Total, TWh||555.609||569.928||586.090||597.173||621.511||632.741||645.418|
|Consumption, Net Consumption, TWh||499.7||487.7||499.4||511.9||526.2||540.9||557.2|
|Capacity, Net, MW||137,463.0||150,206.3||157,255.8||161,829.8||172,578.6||176,022.3||178,402.1|
Latest Updates And Structural Trends
Brazil current macroeconomic malaise will increase costs for power project developers through higher interest rates, while persistent currency weakness will inflate import costs. These factors - coupled with an ongoing investigation on state-run utility Eletrobras, which could result in delays and asset impairments - are tempering our growth outlook for power capacity and generation in Brazil over the coming decade. As such, we forecast growth in the Brazilian power sector to be significant, but below the government's official targets.
This quarter we have revised up our forecast for Brazil's hydropower capacity and generation over the next 10 years as a result of progress in the implementation of the country's project pipeline, including the Belo Monte mega-project. In late January 2016 a federal court revoked a lower court's injunction that had suspended the operating license for the hydropower plant, clearing the way for the commissioning of eight of its 24 turbines - with the switch-on scheduled for February 2016.
We expect to see a number of privatisations in the Brazilian power distribution sector in 2016 and 2017, starting with the sale of Eletrobras' stake in Celg-D. In late December 2015, the shareholders of Eletrobras authorised the sale of the company's 50.93% stake in Celg-D. The privatisation of Eletrobras' other six (fully owned) power distribution subsidiaries is also on the cards as the company needs to raise cash to invest in its power generation and transmission segments, but a decision on their sale has been delayed.
The drought that has affected Brazil over the past two years has started to ease since the last few months of 2015. As a result, in late January 2016, Brazil's electricity regulator Aneel cut part of the surcharge imposed on power tariffs - triggering a rally in the share price of Brazilian listed utilities. In particular, Aneel approved a reduction in the extra fee charged under the red and yellow flag system, with the change to be effective from February 1.
BMI's Country Risk team has further downgraded its 2016 real GDP growth forecast this quarter, from -0.8% to -3.4%. This will be on the back of rising unemployment and household defaults which will undermine private consumption. Moreover, inflation is set to remain high as the real sells off amid capital flight, prompting domestic prices to rise. As a result - and given the strong correlation between falling industrial activity and contracting power consumption seen in 2015 - we have revised down our forecast for Brazil power consumption in 2016.
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).