Eletrobras: privatization brings investments, but electricity bill may not fall

Eletrobras: privatization brings investments, but electricity bill may not fall

The privatization of Eletrobras will generate more investments in the country’s electricity sector, accelerate the growth of energy supply for families and companies, reducing the risk of blackouts in the coming years, say professionals in this market. But experts are not sure whether this move will guarantee a reduction in Brazilians’ electricity bills. No longer state-owned, Eletrobras gains greater freedom to invest and attract partners and investors because it will not depend on the government’s budget, which has become increasingly tight over the years, say professionals in the sector heard by UOL. But by going private, the company will pursue profit as a priority, which can lead to higher tariffs. Once privatized, Eletrobras is going to cut down and seek to make a profit and, therefore, will have more appetite to make investments. This represents money entering the sector, attracting new capital, including foreign capital. Rodrigo Ferreira, president of the Brazilian Association of Energy Traders (Abraceel) No government constraints to invest When it is no longer controlled by the government, Eletrobras will have greater potential to make investments for two main reasons: Agility: The company will have greater autonomy and agility to evaluate and implement new projects because it will not be forced to follow the bureaucracy of a state-owned company. The weight that government decisions have on Eletrobras can be measured by the difference between the budget the company has to invest and how much it actually spends. In 2021, it had BRL 8.2 billion to invest in projects, but spent BRL 4.7 billion. Less uncertainty: Because it is controlled by the government, Eletrobras may have changed or interrupted new projects because of decisions made by the government at the time. This creates uncertainty for investors and financiers, which reduces the money supply for projects or increases the interest on financing for the company. How much more can Eletrobras invest According to market professionals, the first step of a privatized Eletrobras can be to achieve the capacity to carry out all the budgeted investment. Potentially, annual investments would then jump from the current BRL 4.7 billion to close to BRL 9.7 billion, considering the company’s Business and Management Master Plan (PDNG) for the period from 2022 to 2026. The sectors generation and transmission will be directly influenced by Eletrobras’ greater investment capacity, say market professionals. But the positive impact should occur first in the transmission segment. Generation: In the capitalization model of Eletrobras, the “devestitization” of its hydroelectric plants is foreseen. In other words, the plants will no longer be obliged to deliver a certain quota of energy to a customer (regulated market) and will be able to sell the energy on the free market. But, as the distributors in Brazil are generally left with contracted energy, there will, at first, be an excess of cheaper energy flowing to the free market. This may inhibit new investments in generation in the short term, says Rosana Santos, a former member of the Ministry of Mines and Energy, at the Center for Studies in Regulation and Infrastructure, at the Getulio Varga Foundation (Ceri/FGV). Transmission: Here the situation is different. The country still needs to improve the interconnection network between submarkets. By reinvesting in transmission, Eletrobras will have greater power to compete in the sector’s auctions. What could happen is that the privatized Eletrobrás has a greater appetite to participate in several auction lots, taking advantage of its synergy, which covers practically the entire national territory. Mario Dias Miranda, executive president of the Brazilian Association of Electricity Transmission Companies (Abrate) Other business: By accelerating its own projects, the company should stimulate business from other companies. An example of this is Eletrobras’ participation in transmission. If the company increases investments in the networks that take electricity to consumers, the different generation projects — from small hydroelectric plants, wind farms or solar units — gain greater potential for economic viability. With the capitalization, Eletrobras should achieve financial sustainability to allocate more resources in the electricity sector. The segments that benefit the most are those in which it operates, which will likely gain another major player competing for more projects. Bernardo Viero, equity analyst at Suno Research Plan of R$ 48.3 billion As it is responsible for 30% of all generation and about 40% of energy transmission in Brazil, Eletrobras needs to make investments proportional to this market share to that its performance does not limit the growth of the sector in the country. In the company’s PDNG for the period from 2022 to 2026, the company plans to invest BRL 48.3 billion. But of this volume, R$ 19 billion are set aside for maintenance and reinforcement of plants and transmission lines that already exist. Eletrobras Investments 2022-2026 Generation: R$ 24.1 billion Expansion: R$ 18.6 billion Maintenance: R$ 5.5 billion Transmission: R$ 22.5 billion Expansion: R$ 8.8 billion Reinforcement/Improvements: R$ 11.3 billion Maintenance: R$ 2.3 billion Other Investments: R$ 1.7 billion According to the company, 50.3% of these resources will have to come from the company itself, and another 49.7% will come from third parties, such as loans, issuance of bonds or equity from partners in projects. In order to have its own money, the company has to generate profit, or receive contributions from the government. To attract third-party resources, the company needs to turn to the market. Government has less capacity to invest Recent surveys show the lower participation of the public sector in infrastructure investments. As the government is Eletrobras’ main shareholder, the lower financial power of the public sector ends up affecting the company’s investment capacity as well. Public sector investments in relation to GDP 2010: 4.6% 2015: 2.85% 2020: 2.58% Source: Ibre/FGV and National Treasury R$ 530 billion in 10 years According to the Ten Year Energy Expansion Plan, from the Ministry of Mines and Energy, Brazil needs BRL 530 billion in investments in energy generation and transmission by 2031 — an average of BRL 53 billion per year. Investments made by Eletrobras 2019: BRL 3.3 billion 2020: BRL 3.1 billion 2021: BRL 4.7 billion If Eletrobras represents about 30% of generation and 40% of transmission in the country, but its investments do not reach 10% of market needs, the electricity sector as a whole has limited expansion, say market sources heard by UOL. Due to its size and national presence, Eletrobras should be participating in more projects to expand the country’s energy matrix. But, today, the company does not invest in growth, only in the base. Privatization helps to remove one of the great uncertainties that the sector had, which was the direction of a state company in a liberalized market. Marcelo Sadri, partner and analyst at Perfin Can the electricity bill get smaller? According to the Ministry of Mines and Energy, the privatization rules that define the use of resources received by the government with the privatization of Eletrobras should reduce consumer charges. If the foreseen scenarios materialize, Eletrobras’ capitalization process could lead to a 6.34% reduction in electricity tariffs for consumers. Ministry of Mines and Energy, in a note to UOL Market professionals say that more investments in the electricity sector should increase the energy supply in the country more efficiently, reducing the risk of blackouts, for example. But they claim that this does not necessarily mean cheaper electricity bills. The fact that the privatized Eletrobras starts to pursue profit as a priority may lead the company to practice higher tariffs, say experts. Even more so in a market that will have more energy being traded in the free market that it is today, where energy sold in the regulated market still predominates. It is not just any investment that Brazilian society should promote because there is the effect of the tariff rebound of decisions not taken technically. Rosana Santos, Ceri/FGV

Source: Uol

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