Subscribe free to our newsletters via your
. Energy News .

S. America upbeat on energy growth in 2013
by Staff Writers
Rio De Janeiro (UPI) Nov 30, 2012

disclaimer: image is for illustration purposes only

Latin America power-generation companies are set for strong growth in the coming years mainly because of an expected surge in demand.

Rising consumer demand has mixed with industrial growth to produce a consistently upward trend in electricity demand in most of Central and South America, even amid recessionary data from countries such as oil-rich Venezuela.

The region's utility industries responded to that demand by continuing to increase power-generation capacity, aided by strong liquidity trends. An overall effect has been to boost gross domestic product in most countries of the region.

Those liquidity gains and positive medium-term electricity demand support a stable rating outlook for Latin American power companies for 2013, Fitch Ratings said in a report.

"Latin American electricity demand is anticipated to be positively correlated to GDP, which is expected to grow by 3.8 percent in 2013, up from 3 percent in 2012," said Fitch Director Lucas Aristizabal.

He cited data to indicate that Latin American power companies' liquidity also continues to be strong.

As of June 2012, the median cash in hand and cash in hand plus last 12 months funds from operations covered short-term debt by approximately 1.1x and 8.7x, respectively.

Despite that strong showing, access to credit continues to be a concern for some companies because of significant capital inputs required over the medium term.

The Fitch report indicates, however, that what is good for the companies isn't necessarily good for the consumer, analysts said.

For example, power companies don't like it when governments try to keep consumer costs low to keep on the right of the voting consumer.

The Brazilian government's attempts to lower end user energy tariffs as much as 20 percent "remain a concern," Fitch says.

Some of these efforts, including a proposal to renew electric concessions early for an upfront payment and lower tariffs and revenues, have the potential to negatively impact credit ratings, the agency warns.

For example, it said, the upfront payment might not be enough for Eletrobras to adjust its capital structure to a level that will still be in line with the company's credit quality.

In general, Fitch says, the Brazilian government's proposals will limit available funds to reinvest internal cash flow generation back into the electricity sector and reduce their ability to access debt capital markets and bank financing.

Analysts say that the companies' profit motives have to be balanced against consumer interests in countries where income disparities remain glaringly obvious. Despite its strong economic performance, Brazil has one of the largest poverty gaps in Latin America, a subject that remains taboo to politicians.

Citizens' access to electricity remains abysmally unequal in other countries, including those cited as strong growth markets in the Fitch report.

Electricity demand is expected to be especially strong in Chile, Peru and Panama and will require capacity additions and associated transmission and distribution investments, Fitch says.

Announced capacity expansions will most likely be insufficient to keep up with energy demand growth in Argentina, Venezuela and some Central American countries.

"This, coupled with already uncomfortably low energy reserve margins in these countries, will have significant short- and long-term consequences," the Fitch report said.

Argentina and Venezuela have frequent power blackouts that tend to affect the governments' popular approval ratings.

Rating actions during 2012 were equally divided between upgrades and downgrades with only 10 rating actions resulting in a rating change. Of the five downgrades during 2012, three were related to Brazilian utility Grupo Rede, which defaulted on its financial obligations during the year.

Eight Grupo Rede Energia power distribution companies were put under government administration in August to avert a rupture in the power supply.


Related Links

Comment on this article via your Facebook, Yahoo, AOL, Hotmail login.

Share this article via these popular social media networks DiggDigg RedditReddit GoogleGoogle

Memory Foam Mattress Review
Newsletters :: SpaceDaily :: SpaceWar :: TerraDaily :: Energy Daily
XML Feeds :: Space News :: Earth News :: War News :: Solar Energy News

Japan's Hitachi, Mitsubishi Heavy to merge power units
Tokyo (AFP) Nov 29, 2012
Japanese industrial firms Hitachi and Mitsubishi Heavy Industries said Thursday they would merge their thermal power businesses by 2014 as they take on global giants Siemens and General Electric. The pair said they would set up a joint venture company that was 65 percent owned by Mitsubishi with the remaining 35 percent held by Hitachi, creating a combined firm with about 1.1 trillion yen ($ ... read more

S. America upbeat on energy growth in 2013

Making sustainability policies sustainable

Need for clean energy 'more urgent than ever': IEA

Japan's Hitachi, Mitsubishi Heavy to merge power units

Argonne National Lab Selected as DOE's Batteries and Energy Storage Hub

Report decries Big Oil's 'oily grasp' on Canada

Iraq oil exports steady in November

China opposes US bill on island dispute

US Navy, DoD, Developer Announce Wind Farm Agreement

Britain: Higher energy bills 'reasonable'

Areva commits to Scotland turbine plant

AREVA deploys its industrial plan to produce a 100 percent French wind power technology

British firm to build 'Africa's biggest solar plant'

The Future Looks Bright: ONR, Marines Eye Solar Energy

The Installed Price of PV Systems in the U.S. Continues to Decline at a Rapid Pace

Upsolar Modules Earn High Marks for Long-Term Performance

EDF raises cost of problem plagued nuclear plant

Italian power giant pulls out of French nuclear deal

Clinton backs Westinghouse bid for Czech nuke deal

AREVA to continue International OECD Research Program for nuclear plant safety

Garbage bug may help lower the cost of biofuel

Tiny algae shed light on photosynthesis as a dynamic property

Algae held captive and genes stolen in crime of evolution

Marine algae seen as biofuel resource

Mr Xi in Space

China plans manned space launch in 2013: state media

China to launch manned spacecraft

Tiangong 1 Parked And Waiting As Shenzhou 10 Mission Prep Continues

Rich nations alone can't halt global warming: report

Long-term research reveals how climate change is playing out in real ecosystems

UN chief urges swift action at climate talks

A human-caused climate change signal emerges from the noise

The content herein, unless otherwise known to be public domain, are Copyright 1995-2014 - Space Media Network. AFP, UPI and IANS news wire stories are copyright Agence France-Presse, United Press International and Indo-Asia News Service. ESA Portal Reports are copyright European Space Agency. All NASA sourced material is public domain. Additional copyrights may apply in whole or part to other bona fide parties. Advertising does not imply endorsement,agreement or approval of any opinions, statements or information provided by Space Media Network on any Web page published or hosted by Space Media Network. Privacy Statement