BRASILIA – The operations of energy distribution and transmission companies in Brazil have a higher average return on investment than other countries, according to the risk rating agency Moody’s Ratings.
In a presentation to the National Electric Energy Agency (Aneel), Moody’s pointed out that the scenario makes the country attractive for investments.
In Brazil, the average annual return between 2019 and 2023 was 7.5%, higher than that recorded in the rest of the world, which was 4.4%.
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Healthy environment
“Looking at these rates of return, we see a healthy environment for investment. Here in Brazil, in our universe, we see a growth rate of 23.8% on average in the last four years, between 2020 and 2024”, stated the director of Moody’s Ratings, Cristiane Spercel.
Another positive factor highlighted by the consultancy is the growth in demand for electrical energy, which has continued to rise by an accumulated 10% since 2019.
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“In the electricity sector, in general, there was a recovery in demand from Covid. It’s a shame it was serious here. But we see that in Brazil the drop was much less pronounced than in the rest of Latin America and it recovered much faster”, he stated.
Moody’s points out that Brazilian regulation is well developed, as there are tariff mechanisms that balance fair prices for consumers and adequate remuneration for transmission and distribution companies.
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Although it sees occasional interference, the consultancy believes that Aneel’s independence guarantees a predictable regulatory environment.
Curtailment is an obstacle
On the other hand, there are challenges that must be faced by the electricity sector, the government and Aneel. Generation cuts (curtailment) represent, according to Moody’s, an issue to be overcome.
Aneel’s general director, Sandoval Feitosa, believes that there should be definitions on the topic in the first half of 2025.
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Even in the face of the problem, Spercel points out that there may be solutions in the next agreements to be signed.
“A very positive point that we see is the evolution of the next distribution contracts with a better allocation between costs and the different participants to mitigate these risks in new contracts at the time of renewal”, he said.
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Despite understanding that Brazil’s electrical matrix is clean and renewable, which puts Brazil in a favorable position in the energy transition, Moody’s points out that there are risks due to the intermittency of wind and solar sources, mainly.
In this context, the installation of data centers in the country is seen as a possibility of attracting investment, but it depends on reinforcements in transmission infrastructure.
