Brazil’s Eletrobras expected to increase capex in coming years

Brazil’s Eletrobras will likely increase its investments in the coming years, according to Sidney Lima, an analyst at Ouro Preto Investimentos. 

"The expectation is that the company will continue to focus on strategic initiatives, including the modernization and expansion of energy transmission and generation infrastructure, with an emphasis on energy transition and sustainability," Lima told BNamericas.

In the second quarter of 2024, the electric power holding company invested 2 billion reais (US$360 million), up 43% on the same period of last year. 

In generation, the highlight was the 403mn-real investment in the Coxilha Negra wind farm in Santana do Livramento, Rio Grande do Sul state. 

In transmission, the company is implementing 246 large-scale reinforcement and improvement projects, with an estimated capex of 7.8bn reais and an associated additional annual allowed revenue (RAP) of 1.2bn reais between 2024 and 2028.

Lima said one of Eletrobras' biggest challenges is the cost-cutting process, which is aimed at reducing manageable expenses over the next few years. 

Another challenge are the ongoing legal disputes over the government's voting power in the company after its privatization, which still creates uncertainty among investors. 

“Eletrobras needs to continue adjusting its liability management, including reducing obligations related to compulsory loans, which is ultimately essential to improving its long-term financial situation,” Lima said. 

Brazil’s supreme court (STF) extended the attempt at conciliation between the government and Eletrobras for another 45 days.

The STF responded to requests made last week by the federal attorney general's office (AGU) and Eletrobras itself. 

The negotiations underway also address the funds the company owes to the energy development account (CDE) and the divestment of its shareholding in Eletronuclear.

Managed by the government, the CDE is a fund with a large contribution from private consumers that finances a series of energy sector policies.

A provisional measure published by the government in April makes it possible for consumers to pay the Covid and water scarcity accounts by bringing forward the receipt of the Eletrobras funds.

On Wednesday, mines and energy minister Alexandre Silveira announced that the contributions owed by Eletrobras to the CDE will lead to a discount of between 2.5% and 10% on energy bills. 

The operation with receivables that the government was entitled to with Eletrobras amounts to 7.8bn reais, according to Silveira. 

The amount was established in an agreement signed with Banco do Brasil, Itaú, Bradesco, BTG Pactual and Banco Santander.

In 2Q24, Eletrobras recorded a net profit of 1.74bn reais, up 7.6% year-on-year.