Wind will continue to be the key in Brazil with the most profitable returns in the energy generation sector, according to analysts at Itaú BBA.
Considering the established A-5 and transmissions auctions this month, the experts believe that wind projects will receive the majority of demand from utility power buyers -- representing 82% of the pre-qualified capacity.
Neither sugar-cane bagasse nor small hydro projects will be competitive enough in this auction, they say
"The ceiling equity IRR for wind projects in this auction is 15.8%, considering an average capex of BRL 3.4 million/MW and the auction's ceiling price for wind projects of BRL 112/MWh. If we consider a floor IRR of 10%, we see room for prices to go down to BRL 90/MWh", the analysts add.
As for the hydro projects, the utilities team research analysts at Itaú BBA is convinced that Eletrobras and Copel ( EPL , quote ) are the best positioned at the auction for São Roque. Yet for Complexo Parnaíba, Electrobras appears to be the only likely bidder.
Finally, at the auction for the transmission projects, which will have "limited returns", Eletrobras, Cteep and Copel are the best positioned.
Given EBR's presence on all three lists of "best-positioned" utilities -- and the fact that ELP does not appear to be a serious bidder on wind -- traders may find it the winner if these auctions go well.