Brazil Power Report Q3 2012

BMI View: Nuclear power made only a brief return to Brazil’s energy agenda in early 2012. Plans to build four new nuclear power stations were put on hold when Energy Minister Marcio Zimmermann announced that nuclear-generated electricity did not form part of the government’s 10-year energy plan. That leaves Brazil’s third reactor at Angras do Reis – which is scheduled to be completed by 2015 – as the only new source of nuclear power until 2022. Consequently, it appears that Brazil will turn to hydropower to meet the growing needs of its energy hungry population and industries, with the controversial Belo Monte dam likely to be a key source of electricity. In terms of renewables, while there has been a surge in interest in solar power, the country will continue to focus on wind power. The question remains as to whether delays to transmission infrastructure will slow the connection of these wind farms to the grid.

Our overall view of Brazil's power market is unchanged. This is in spite of the government’s decision to put its nuclear power plant expansion plans on hold for a decade and the downward revision of Brazil’s 2012 real GDP growth forecast from 4.8% to 3.9% by BMI's country risk analysts. We forecast that Brazil’s power sector will continue to post strong demand, even though some risks remain, with growth in consumption expected to average 4.5% a year between 2012 and 2021. BMI calculates that total electricity generation capacity in 2011 stood at 505.54 terawatt hours (TWh) and that this figure will rise to 528.87TWh by 2012 and to 757.19TWh by the end of our forecast period in 2021. We forecast that hydroelectricity generation will continue to dominate the energy mix, accounting for an anticipated 434.14TWh in 2012 and rising to 599.12TWh by 2021.

Key areas of growth will include hydropower expansion, with the Belo Monte dam driving this growth and opportunities for new renewable power developments. A new government policy, known as ‘net metering’, introduced by ANEEL, aims to boost small-scale solar energy projects with 1 megawatt (MW) capacity, offering homeowners financial incentives to install rooftop solar panels. Multinationals are also turning to Brazil to invest in wind power, namely Spain’s Acciona Wind, Italy’s Enel Green Power and Germany’s Fuhrländer.

Key developments in Brazil’s power sector include:

Brazil’s government has put its nuclear agenda on hold, with Energy Minister Márcio Zimmermann announcing in May 2012 that the country’s 10-year plan only includes the construction of Angra III. Sweden’s AF Group won a SEK600mn (US$84.1mn) contract to construct Angra III in Q212.

Brazil’s government plans to draft a law that will facilitate the renewal of power concessions; a bill was scheduled to be presented to congress by the end of June 2012.

M&A developments include CPFL Energia’s BLR1.06bn (US$620mn) deal to acquire wind power company Bons Ventos Geradora de Energia and State Grid Corp of China’s acquisition of Brazilian transmission assets.