Why Brazil's electricity sector remains attractive for M&As

Brazil's electricity sector remains attractive for mergers and acquisitions, despite economic obstacles. 

"With the election of [President Luiz Inácio Lula da Silva], who brought a stronger decarbonization agenda, there was a return of European and Asian investors, as well as pension funds and sovereign wealth funds," KPMG partner Paulo Guilherme Coimbra told BNamericas.

On the other hand, the low price of energy on the free market and the country's high interest rate pose challenges. 

"Those who are in the greenfield phase of projects, without a signed [power purchase agreement], face greater difficulties when looking for M&As," he said. 

In addition to distributed solar generation, Coimbra said there is strong appetite for energy transmission assets, especially brownfield projects.

Meanwhile, major oil companies, such as Equinor, TotalEnergies and Shell, are consolidating their renewable energy agendas, looking not only at power generation but also commercialization. 

All three, like Brazil’s federal oil company Petrobras, are also looking at offshore wind generation, which still depends on regulation.

Oil and Gas

In the oil and gas exploration and production area, M&A opportunities waned after Petrobras practically concluded its divestment program, which mainly involved onshore and shallow water assets. 

"There's little pipeline for onshore, and there are a lot of players who have come in and gone public, so at some point there will have to be consolidation," Coimbra said.

"Offshore is already like this: usually one operating and several sharing the risk, due to the high capex of the projects," he added.

SOLAR 

Consultancy Greener mapped 11 public transactions involving companies in the solar chain and photovoltaic generation plants in Brazil in the third quarter, more than double the number in the same period last year.