Fitch: Brazilian Electricity Demand will Match GPD Growth, Benefiting Distributors
Link to Fitch Ratings' Report: Brazilian Electricity Sector: Market
Dynamics and Risks
Brazilian electricity demand will continue to follow the country's GPD growth, benefiting distribution companies and possibly mitigating the negative effects of the third tariff review cycle, according to Fitch Ratings.
Fitch estimates growth to be in the range of 3.6% to 4.5% through 2013. Energy consumption in Brazil has closely followed the country's economic expansion, primarily supported by recovery in the industrial segment and the resilience of residential consumption after the global economic crisis in 2008 - 2009. In 2010, energy consumption in Brazil grew by 7.8%, while real GDP growth was 7.5%.
The sector's main uncertainty is the government's pressing need to define the concession renewal rules given that some concessions start expiring as early as 2015. This could hinder some generators' ability to enter into contracts.
Generators that sold their firm capacity to distributors through the first public auction during 2005 - 2012 cannot re-contract this energy if the concession expires in 2015. This could prevent distribution companies from meeting their obligations to have sufficient energy contracts in place to supply demand.
Fitch views Brazil's regulatory structure as both stable and mature, reducing the electric companies' exposure to regulatory risks. The Brazilian energy regulator is expected to promote new auctions to reinforce the transmission and generation capacities in order to meet demand growth. Exclusive auctions for the development of renewable sources of energy should in the coming years.
The full report 'Brazilian Electricity Sector: Market Dynamics and Risks' is available at 'www.fitchratings.com.' This report is one of a Fitch series analyzing the power sectors in each major Latin American country.
Additional information is available at 'www.fitchratings.com'.
Lucas Aristizabal, +1-312-368-3260
70 W. Madison Street
Chicago, IL 60602
Mauro Storino, +55-21-4503-2600
Brian Bertsch, +1-212-908-0549