Brazil: Investment In Brazilian Power Sector: Challenges And Opportunities

Brazil is now in the process of recovery from one of its worst economic recessions since 1929, and from its biggest political scandal, both of them mainly caused by corruption scandals. Nonetheless, several changes are being implemented and discussed to allow resumption of economic activity and foreign investment in the country. Not only due to the new  expected  outlook  for  the  Brazilian  power  sector,  but  also  due to  the difficult financial  situation  of  important  players  in  the  sector  whose  assets  are  for  sale,  the Brazilian power sector currently presents good investment opportunities. This article will present  some  of  these  opportunities,  but,  as  we  are  not  Alice  thinking  of  Brazil  as  a wonderland, also deal with some of the challenges to be overcome by the investors.

It is undeniable that, after Dilma Roussef's impeachment, a new phase has started for Brazil, and for the power sector. The team built by new president Michel Temer is mainly composed  by  well  known  professionals  of  the  power  sector, what  was viewed  by  the market as a strong indication that the changes will lead to a more investment-friendly regulatory framework. For instance, the economy has been giving signs of recovery (for example,  the  recent  decrease  of  SELIC  rate  by  Brazilian  Central  Bank  to  14%  -  first decrease  in  the  past  4  years)  and  important  reforms  and  legal  matters  are  under discussion in the congress to enhance foreign investments in the country .

In this context, and despite the current and temporary surplus of energy contracted by distribution concessionaires, as soon as economy resumes to the level it had before the crisis,  power  demand  will  obviously  increase.  In  addition,  considering  the  projected increase for Brazilian GDP's in the following years, there will be a continuous need for new  installed  capacity  and  its  associated  transmission  and  distribution  infrastructure. Based on the ten-year energy expansion plan disclosed by federal government in the end of 2015, the current installed capacity of Brazilian power system is of 160GW, and by 2024  the  Government  expects  an  increase  of  46,447MW,  part  of  which  is  already contracted and under implementation. On transmission lines there is also an expected development up to 2024 by an increment of 85,782km of new lines.

The installed capacity increase will be composed mainly by the expansion of solar, wind, biomass and even nuclear sources, but hydro will continue to be the main source in the Brazilian  matrix  and  thermo will  still  have a  system  security  role. Solar is planned  to increase seven times and represent 3% of total installed capacity; wind will increase five times, jumping from the current 6% to 12%; biomass that currently has no significant portion is expected to represent 9% by 2024. According to planned, by 2030, non-hydro renewable sources will represent 40% of Brazilian power mix.

To meet such expected growth, the government has been using the already traditional and tested auction schemes for generation and transmission assets, but now with more attractive  return  rates  and  more  realistic  conditions.  For  instance,  after  revising  the parameters initially proposed, the transmission auction scheduled to the end of October has increased  the annual  maximum  revenue  in  around  10.2%, with a  total  estimated amount of R$2.3 billion

However,  there  are  challenges  to  be  overcome  by  the  investor  willing  to  invest  on greenfield  projects  and  here are  some  of them:  (i)  restrictions on  acquisition  of rural properties by Brazilian companies controlled by foreigners and the uncertainties created by an  opinion from  the Brazilian General  Attorney's Office; (ii) environmental  licenses may be very difficult and time consuming, sometimes resulting in the non-viability of the project (even though there is a project of law being analyzed by the congress aiming to simplify the environmental licensing process and a pretty new law provides for longer construction  periods  for  projects  sold  in  auctions);  and  (iii)  labor  laws  are  still  very protective of the employees, although there is no tenure on the job. At last, but no least, there is a latent need for tax, political, labor and social security reforms, but some of them are already under discussion in the Congress.

Private investors willing to swim such challenging waters may also want to keep an eye on several different assets that are being sold, in different stages of construction and operation, mainly by companies that are facing liquidity issues or even going through court-supervised reorganization. There are also different opportunities in transmission, distribution  and generation  projects whose construction  works have been  delayed  and are unlikely to be finalized according to the schedule initially approved by ANEEL.

The issues surrounding Petrobras's crisis, the enactment of Brazilian Clean Company Act (or anti-corruption law) and other recent political scandals are also bringing investment opportunities in the power sector. The construction companies involved in the "car-wash operation" launched by Brazilian Federal Police are selling different assets in the sector trying  to  remedy  a  severe  financial  crisis,  mainly  due  to  the  difficulties  on  obtaining financing.

On transmission, there are also M&A opportunities. The most challenging one is related to  the  assets  owned  by  Abengoa  Group,  which  is  currently  under  court-supervised reorganization, and owns relevant concessionaires in the sector. A specific law is being passed to enable the sale of the concessionaires with more attractive concession conditions.

On generation, there are also auctions to be organized by state-owned companies to sell existing generation plants in the States of Paraná, São Paulo, Santa Catarina and Minas Gerais, such as power plants Jaguara, São Roque, Miranda and São Simão.

In  the  distribution  area,  the  government  is  promoting  the  sale  of  distribution  assets currently owned by Centrais Elétricas Brasileiras S.A. – Eletrobras. This sale is seen as a unique opportunity for Eletrobras to rebalance its financial statement. Up to now, seven power distribution concessionaries of Eletrobras are expected to be privatized and sold in 2016 (Celg) and as of 2017 (the other distribution companies). New legislation is being passed to make the sale faster and to help Eletrobras's financial situation to be under control. In addition, important distribution companies were sold in 2016, contributing to the consolidation of important groups in the distribution sector.

The corruption scandals and the efficient way that Brazilian authorities are reacting to them  are  also  changing  the  way  business  and  deals  are  being  done  in  Brazil.  Both national and international companies with subsidiaries or branches here are implementing  robust  compliance  programs  and  acquisition  deals  are  granting  special attention to earn out conditions, price holdbacks and special indemnities. Regardless of the deal's structure, M&A  transactions must  be preceded  by  a  thorough  due diligence especially of actual and potential liabilities in the tax, labor, compliance and environmental areas.

As  a  consequence  of  so  many  challenges  and  opportunities,  Brazilian  power  market currently seems to attract those with bigger appetite for risk and long term viewers that, as us, believe that after the storm Brazil will be stronger and "cleaner" than ever before.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions