Notícias ABIAPE

For Battered Brazilian Utilities, $8 Billion Bill Is Latest Blow

Bloomberg Business


Vanessa Dezem


Add one more item to the list of reasons investors still shun Brazilian power utility stocks: an $8 billion energy bill.

That’s how much JPMorgan Chase & Co. estimates they had to pay last year to buy power in the spot market because of energy shortages caused by a drought and project delays. And that applied to all of them. Under Brazilian regulations, even generators that meet their supply contracts, like CPFL Energia SA and GDF Suez’s Tractebel Energia, must foot part of the bill when the entire industry falls short.

The charge is the latest blow for an industry that lost $25 billion in market value since 2012, when the government forced power utilities to cut prices if they wanted to hang on to their generating licenses. This year, generators can expect to pick up a tab of as much as 35 billion reais ($11 billion), JPMorgan analysts said in a report in March.

“The government’s biggest problem is trying to figure out who is going to pay the price for the shortfall,” said Mario Menel, president of the Association of Investors in Energy Self-Generation, known as Abiape. “Today, it’s the companies’ shareholders who are paying this bill.”

The MSCI Brazil Utilities Index tumbled 58 percent since the start of 2012 through yesterday’s close. Centrais Eletricas Brasileiras SA, the state-run utility known as Eletrobras, posted the biggest decline in the period. The stock fell 1.5 percent to 9.85 reais Thursday in Sao Paulo.

Delayed Projects

Two industry associations known as Abrage and Apine are petitioning Brazil’s energy regulator, Aneel, to reimburse utilities for at least some of the expenses.

While drought risks are part of the business in Brazil, where three-quarters of the nation’s energy comes from hydropower plants, the groups say there’s a key difference this time: delayed projects. The drought wouldn’t matter nearly as much, they argue, if so many transmission lines and power plants weren’t delayed. Aneel began considering their request this week and will rule whether companies should be paid back in coming months.

“When companies signed contracts to produce hydroelectric energy years ago, they were counting on new generation that didn’t materialize,” Menel said. “Delays weren’t in the account, and now those costs are falling on generators’ shoulders.Bloomberg Bi”

Aneel declined to comment.

The power shortfall last year would have been halved had all the planned projects come online as planned, Sao Paulo-based energy consultant Thymos Energia estimates.

Ratings Cut

Eletrobras, which holds the biggest stake in some of the delayed projects including the Belo Monte, Jirau and Santo Antonio hydroelectric dams in the Amazon, was cut to junk by Moody’s Investors Services last week. The ratings company cited weak credit metrics. Eletrobras didn’t respond to telephone calls and e-mails seeking comment.

For CPFL Renovaveis SA, the renewable-energy subsidiary of CPFL that operates the company’s small hydro dams, the extra charge -- officially known as the Generation Scale Factor, or GSF -- was enough to trigger a net loss in the first quarter, unit President Andre Dorf said in an interview May 7.

“We weren’t expecting that loss,” he said. “If it weren’t for the GSF, we would have had a neutral result.”

‘Clearer Skies’

Still, 2015 could be a turning point for the power utility sector, according to the JPMorgan report led by analyst Marcos Severine. The government has allowed distributors to raise rates by 45 percent so far this year, after slashing prices by 20 percent in 2012. That combined with better rainfall and weakening demand as the economy slips into a recession could mean “clearer skies ahead,” Severine said in the report.

For now, generators will continue to struggle under the burden of the GSF costs. Aneel’s technical committee last week recommended that the agency refuse generators’ request to be reimbursed. All the factors that led to the losses were “officially predictable,” it said in a statement.

“The energy generation sector isn’t attractive this year and perhaps it won’t be next year either,” Alexandre Montes, an equity analyst at Lopes Filho & Associados Consultores de Investimentos, said in a telephone interview from Rio. “The water crisis is a variable that’s out of our control.”


Hoje, o Fórum de Meio Ambiente do Setor Elétrico - FMASE conta com 19 entidades na sua formação, e é uma das principais vozes do setor para tratar das questões ambientais referentes aos empreendimentos de geração de energia.

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