Analyst: More liberalization could darken generators outlook

The situation of power generators in Brazil could worsen next year with increased sector liberalization, Raphael Quintanilha, an electric power analyst for Portuguese bank BES Securities, told BNamericas. Under the current model generators are required gradually to liberalize output by negotiating purchasing power agreements (PPAs) or selling on the country's wholesale power market MAE. This year generators put an initial 25% of their total output for sale on the market. In the case of Furnas, controlled by federal power holding Eletrobras, this has amounted to some 1940MW. In 2003 the subsidiary must place 50% of output, or some 3878MW, on the market. Of the additional 25% generators are putting on the market, some 15% has been contracted in PPAs of varying length, with the other 10% expected to go to the MAE, Quintanilha said. "Distributors are hedging against risks by diversifying contracts because of how the new energy model could impact the sector," he said. Most generators will lose out because of depressed prices, but those with distributors as sister companies will likely win because they have a guaranteed buyer, Quintanilha said, adding that self-dealing is limited to just 30% of a distributors' purchases.