SAO PAULO, March 3 (Reuters) - Brazil’s power sector has an ample set of assets on sale at attractive prices but political and economic uncertainties should keep new entrants away, favoring a consolidation driven mostly by foreign groups already operating in the country.
Experts see potential for Asian players to increase their operations in Brazil, since they would fit better in the current risk and return situation.
“I see the Japanese and Chinese seeking to invest in infrastructure in general, and in energy more specifically,” said Iara Pasian, an electricity consultant at the local office of Deloitte.
“Because of their culture they are not thinking about today, but are looking 30, 50 years ahead... Their returns’ perception is different”, she says.
Local players are selling assets in an effort to cut down debt and raise cash for investments in a moment of restrictive and expensive credit, Pasian said.
Brazil’s worst economic and political crisis in more than 30 years has hammered investors’ confidence in the once emerging-market star. The Brazilian economy contracted 3.8 percent last year, government data showed on Thursday, paving the way to what could be the country’s deepest recession in its modern history.
Companies such as Chinese Three Gorges and State Grid have made large acquisitions recently in Brazil, while Japan’s Mitsui bought the gas unit Gaspetro from state-run oil company Petroleo Brasileiro SA.
“Whoever has cash will be able to surf in this wave of consolidation,” said João Victor Ferraz, corporate transactions manager at EY.
Among the assets on sale, are the hydroelectric power plant owned by U.S.’s Duke Energy, thermoelectric plants from Petrobras, wind farms from Renova Energia SA and power distributor Celg, controlled by state-run electricity holding Centrais Eletricas Brasileiras SA.
Ferraz said there was some interest from foreign groups new to Brazil despite the uncertainties, but he also believes potential deals will most likely be secured by foreign companies already operating in the country.
Power generator Tractebel Energia SA, controlled by French group Engie, said this week it was evaluating carefully the assets on sale with intention to increase its holdings.
Rogério Gollo, a partner at PwC, says the outlook for the power sector in Brazil, with expectations for further demand declines, does not help to spur interest, although energy investments are usually based on long-term returns. (Writing by Marcelo Teixeira; Editing by David Gregorio)