We are initiating coverage of four
Brazilian electricity generation stocks:
Tractebel at Overweight (V), AES Tietê
at Overweight, Cesp at Neutral (V), and
Eletrobrás at Underweight (V)
􀀗 Though high electricity prices seem
inevitable for a few years, sector
dynamics indicate uncertainties and
downward pressure from 2013
􀀗 We expect distinct effects of this
scenario on each company; we regard
Tractebel as best-positioned to benefit
Fundamentals are driven not only by the market’s logic.
Our analysis of potential new generating projects on the
Brazilian government’s radar suggests that it is not counting
on plentiful or easy alternatives to reverse tightened supply
at least before 2012. An immediate conclusion might be that
prices should increase at the pace of demand growth.
However, our analysis leads us to the opposite conclusion
when we consider these three factors: the government’s
likely option to retain prices of so-called old energy, with
contracts ending from 2013; limits on the free market’s
demand; and expiration of concessions. Our view is that the
likeliest scenario is one of lower prices in the free market
from 2013 and flat tariffs in the regulated market.
A below-consensus view. We believe that the upward trend
of free-market prices has dominated views of the sector. In
our view, this is overdone, and we do not expect to see
further increases from BRL130-140/MWh. Also, our
scenario for the period after 2012 has lower-than-average
prices in comparison with consensus projections.
Distinct effects on valuation. Despite our more pessimistic
price assumptions, effects on the companies’ valuations
depend on their contract structures. The amount of energy in
portfolios, together with current and future exposure to freemarket
clients and the captive market, are key to be
monitored. We believe that companies with balanced growth
and active traders and strategies – such as Tractebel – should
benefit the most under this scenario.

目录

Shock hazard 4
More than a question of
capacity 7
Valuation 15
Company profiles 21
Tractebel Energia 22
AES Tietê 31
Companhia Energética de São Paulo
(Cesp) 40
Centrais Elétricas Brasileiras
(Eletrobrás) 48
Disclosure appendix 59
Disclaimer 63