Brazil Wind Farms on Sale as Weak Economy Spurs Demand for Cash

Industry:    2016-02-19

Brazil’s slumping economy and plunging currency have clean-energy companies seeking to sell wind farms to boost liquidity. “There are many wind assets on sale as we experience a moment where energy companies are recycling capital,” said Elbia Silva Gannoum, president of Brazil’s wind power association known as Abeeolica. Companies including Odebrecht SA, Renova Energia SA, Tractebel Energia SA, and RDS Energias Renovaveis Ltda have already announced they’re looking for buyers or partners. There are probably other developers that are pursuing deals and haven’t disclosed their plans, according to Helena Chung, an analyst with Bloomberg New Energy Finance in Sao Paulo. “Wind parks in Brazil are competitive and it is a good opportunity for companies that didn’t have the chance to enter in the market yet,” she said in an interview. The declining real makes assets more attractive to foreign investors. Rising Debt Brazil’s energy companies need cash. Many are swimming in debt and renewable companies are leading the pack. JPMorgan Chase & Co. estimates that utilities had 87.2 billion reais ($21.9 billion) of obligations at the end of the third quarter, according to a report last month. Their debt has increased in part because of Brazil’s 14.25 percent benchmark interest rate, the highest in almost a decade. “The perspectives for mergers and acquisitions in Brazil are very positive now,” said Arthur Ramos, partner at Strategy&, the strategic consulting unit of PwC. “Many energy companies in the country can’t increase their debt levels and are not able to plan new investments. So they are looking outside.” At the same time, Brazil’s wind capacity is booming, with projects adding more than 10 gigawatts in about four years, according to Abeeolica. The country has 9 gigawatts of installed wind capacity, the most in Latin America and 10th worldwide. The real is the worst-performing major currency in the past year, losing more than 40 percent of its value against the dollar. The country’s debt rating was cut deeper into junk territory Wednesday by Standard & Poor’s. Brazil first lost its investment-grade rating from S&P in September. “The rating loss cuts off many potential buyers, but there are many companies that might bet on Brazil,” Chung said.

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