Brazil has just entered a new era of investments in power transmission. The stakes are high for investors, and the matter is urgent for the country, making the segment a rare opportunity.
Two years into its greatest recession, the Brazilian economy is slowly resuming growth, and structural economic measures are being implemented to position the country on a growth track.
Economists believe investment is the engine of growth for emerging economies such as Brazil. With Brazilian unemployment skyrocketing in the past two years, the recovery will not come from a new wave of consumption stimuli, but rather from investments — most likely in infrastructure, which supports other productive activities and contributes to higher productivity for the economy as a whole.
The electric power sector has been one of the first to resume investments, with the transmission segment being the first priority. It requires investments of R$70 billion (~US$22 billion) in the next three to five years to meet three main systemic needs:
- Connecting consumption centers to power produced by new generation assets located in increasingly distant regions
- Fully integrating the national grid, which will reduce the risk profile of the power supply and reduce the overall systemic cost
- Recurrent upgrading and renovation of old asset
In this Executive Insights, L.E.K. Consulting examines why April 2017 is a key month for transmission investments, how winners of 2017 auctions will benefit from improved economic conditions, and what investors need to know about market conditions in order to be successful.
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