Credit: Empiricus is disappointed with the A-5 auction for energy projects in Brazil as it shows problems with other sources than wind, which alone will not be able to fulfill demand.
While wind holds supremacy , hydroelectric faces problems with environmental licenses, while thermal power plants have trouble with supply contracts, analysts at Empiricus point out.
The thermal problem is old and familiar to investors. Brazilian companies failed to made contracts for gas supply, which rendered their operations non-viable when gas prices climbed out of reach.
Therefore, the Empiricus team wonders: "What's the sense of an auction initially structured for hydroelectric companies that, due to rising environmental demands, left 1,700 MW of offered power on the table and only contracted 135 MW of power capacity?"
Furthermore, Empiricus is worried with profitability of some projects after Energias do Brasil ( EOC , quote ) was the only public seller to allocate power.
EOC was responsible for the lower price among wind companies -- the only project with a lower price ran on sugar cane bagasse, which was BRL 95/MWh ($52/MWh).
"In general, the auction marked our discomfort about the blend of power sources that have been worsening hydro and thermal projects' contracts," the analysts add.
Even if analysts recognize the significance of wind energy, they also realize that it won't result in enough production capacity to respond to demand in the "next few years."
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
