October 1, 2020

Moody's expects an improvement in Brazil's power generation industry

Brazil's power generation industry will get better results in 2020 due to a gradual increase in demand and greater availability of alternative sources, according to a report released Tuesday by Moody's.

The risk rating agency changed its perspective of the sector from "stable" to "positive" in the expectation that "the operating margins" of the companies in the industry will be above 50% next year.

He also argued that the demand for electricity should "grow gradually" and predicted that the hydrological risk will be "more manageable", a key factor that will still have to be observed throughout 2020 and could change current forecasts.

"We expect electricity consumption to grow about 2.6% in 2020 as demand increases along with an improvement in economic conditions" in the South American country, said Moody's senior analyst Cristiane Spercel, in a statement.

The agency said that, despite the increase in demand, average energy prices in the spot market (market for short-term purchase and sale of electricity) will fall between 10% and 12% in 2020, as consequence of the "conclusion of more efficient generation projects and new transmission lines".

In addition, he stressed that the official interest rates, at historical lows (5.0% per year), also favor an improvement in the performance of the generation industry, since "it allows greater flexibility in the management strategies of liabilities and alternatives of financing for new projects ".

Moody's also stressed that the hydroelectric plant "will continue to be the primary source of energy for Brazilians," despite the fact that the percentage of wind sources in the country's matrix has increased "significantly."

According to official estimates, the Brazilian electricity sector will demand investments worth 450,000 million reais (about 107,140 million dollars) in the next decade for the construction of new generation plants and transmission lines.

Investments, according to the Brazilian Government, are necessary to meet the estimated growth of 35% in electricity generation and 39% in transmission.

. (tagsToTranslate) Moodys (t) industry (t) generation (t) energy (t) Brazil

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