PROJECT FINANCE MAGAZINE: Alternatives in Brazil, hiatus or on ice?

On the surface, Brazil’s alternatives sector looks healthy. Project finance volumes and the number of deals went up substantially last year and wind is today a serious contender at Brazil’s competitive auctions, open to all energy sources. However, the once fast-growing small hydro sector is moribund and biomass from ethanol faces a series of challenges including subsidized gasoline prices from Petrobras. Wind is facing pressures from local content rules and aggressively priced auctions too.

 

Last year was a comeback for Brazilian renewable energy. Including large hydro, the volume raised in such deals hit $4.257 billion up from a trifling $63 million in 2011 and the highest in 10 years with the exception of 2009. Although last year’s numbers were skewed by the giant Jirau hydroelectric plant expansion, large alternative deals also swayed the numbers, such as wind farm deals including the Ventos Wind Power Project and ERB Aratinga Candeias Biomass Power Project. They raised $409 million and $127.88 million, respectively.

 

This year looks rosier for auctions of new capacity thanks to higher economic growth. The Empresa Pesquisa Energetica (EPE) maps Brazil’s centrally planned energy sector and provides 10 year plans which are adjusted according to GDP growth. After posting just less than 1% GDP growth in 2012, the Brazilian economy is expected to reach levels of 3.1% this year, according to the latest Central Bank poll of economists.

 

Lower energy prices thanks to government policies designed to reduce rates by 18% for consumers and 32% for industry will further stimulate demand while very low levels at Brazilian reservoirs means the government is keen to tap non-hydro power sources, points out Sergio Heumann managing partner at Rio Bravo Advisory. The government is particularly keen to avoid black-outs in the run-up to the 2014 World Cup and 2016 Olympic Games to avoid embarrassing headlines.

This is the start to an article on alternative energy in Brazil and is the version as submitted (pre-edited). If you would like to read the full article, please go to www.projectfinancemagazine.com. 

 

About admin

I've been researching and writing on Brazilian financial markets, industry and economy since 2006 for a wide range of specialist media, consultancies and investors. Before that I spent over 10 years in London and New York writing for and editing magazines and journals dedicated to finance, investment and economics in developing markets, mostly for the Euromoney Institutional Investor group and Thomson Financial. Areas of coverage Below are samples of areas that I cover and some of the common themes that I investigate. Capital markets BM&FBovespa markets *capital raising trends: via equities (IPOs and secondary issuance), debt and loans *the asset management industry: legislation and coverage of the key hedge, pension and investment funds * corporate governance: how the regulator is seeking to strengthen best practice and limitations * debt markets: the nascent corporate markets, attempts to boost liquidity and new insturments. * private equity market: why this market has been so successful, who’s involved. *electronic, high frequency trading and alternative trading platforms: what does the future hold? Banking *credit: the growth of consumer and business credit and competition between banks and models *Public versus private: the role and market share of public and private sector banks and the politicization of the industry * internationalization: which Brazilian banks are expanding overseas and where * investment banking: the growth of the domestic market and who’s winning which mandates *regional banks and development banks: what role they play in the industry and how they compete Mining *licensing: the complex process of obtaining environmental, water, land and operating licenses at a state and federal level. * capacity: the feasibility and sustainability of capacity increases * financing: how miners are raising finance in Brazil and abroad *competition: the interplay Vale, MMX and junior miners *logistics: rail, road and port connections Oil and gas: the fund raising issues related to the massive of pre-salt (link) Multilatinas: Who are they and how and where they are expanding Meatpacking: Are debt burdens sustainable, what are the different business models for areas such as branding and distrbution Agriculture: How are farms consolidating, what are environmental risks, how can foreign investors be involved. IT and software: Can Brazil take on India and build a viable long-term IT industry? For more information on clients and work, please see the media and consultancy sections.
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