SAO PAULO – With the worsening of the water crisis, the financial market is already beginning to outline possible scenarios in the case of energy rationing. And in it, some companies can even benefit. This is the case of Eneva (ENEV3), which had its recommendation raised to performer (performance above the market average) by Itaú BBA.
According to the bank, the company is the best name to invest in this context, due to its “high quality management team, excellent track record in capital allocation and great growth potential”. Itaú BBA raised the target price for the company’s shares from R$15 to R$18.60 – which implies a potential increase of 13.6% compared to the closing of the last trading session.
“We believe that Eneva is the best vehicle to face the challenging water crisis due to its zero impact on the GSF (hydrological risk measure), the fact that its uncontracted volumes will benefit from extremely high energy prices in 2021 and 2022, and the huge growth opportunities we see for the company, with relatively low competition,” analysts write.
According to analysts, Eneva’s acquisition of the Petrobras complex (PETR3; PETR4) in Urucu, which contains 34 billion cubic meters of gas, could be a “game changer”, given the huge reserves of natural gas.
In addition, a potential for additional high for the company’s shares may come, according to Itaú BBA, from the development of new thermal plants, with Eneva’s participation in auctions in September and, mainly, in December this year.
“We hope that the federal government will contract a significant number of thermal plants to reinforce the system’s security and reduce its dependence on hydroelectric generation”, justify the analysts.
Despite the great potential for growth for the company, analysts assess that the company should not require a capital increase. That’s because they expect Eneva to be able to quickly deleverage due to the growth in earnings before interest, taxes, depreciation and amortization (Ebitda) – which should be driven by the start of projects under construction and by the increase in sales in the spot market.
The bank also sees room in the company’s balance sheet for the December 2021 auction to develop a 600 MW project, as the project will be implemented over a period of five years.
In relation to the company’s shares traded on the Stock Exchange, Itaú BBA highlights that Eneva has presented one of the best performances in the sector of utilities in the year, with gains of 5.41% until Monday (13), surpassing the performance of the Ibovespa, which had a drop of 2.2%.
According to the analysis team, there is room for additional gains due to the water crisis and the company’s enormous growth potential.
Impacts of the crisis on the electricity sector
In the assessment of XP Investimentos, although the energy rationing scenario can largely impact the Brazilian economy, companies in the electricity sector should not be so impacted or even benefited.
Analysts analyzed the impact of energy rationing in the last quarter of 2021, assuming a mandatory 20% cut in generator contracts, both in the free market and in the regulated market.
In a report, analysts Victor Burke and Maíra Maldonado write that energy transmission companies will not be affected, distributors may be slightly affected and generators may even benefit.
This is because, while transmission companies have fixed revenue contracts, based on line availability and inflation-adjusted revenue, that is, regardless of consumption or generation, generators can benefit, for example, from higher energy prices in the short term deadline.
Power distribution companies, on the other hand, may have a negative short-term impact, but no impact on the value of the companies, according to XP.
“In the case of a mandatory cut, although we estimate that companies would have a negative impact on the short-term result of around 18%, they can ask Aneel for the economic-financial rebalancing of the concession. In this way, as we saw in 2020 with Conta-Covid, distributors would be protected”, the analysts write.
Generation companies may benefit depending on market conditions, but analysts point out that this is not trivial. “For generators, energy rationing can be beneficial to results depending on four factors: (i) level of hydrological risk (GSF); (ii) short-term energy prices (PLD); (iii) configuration of the company’s generation matrix; and (iv) level of contracting of the company’s portfolio. These variables can result in a positive or negative impact”, they assess.
Within XP’s coverage universe, the companies most exposed to the power generation segment are: Cesp (CESP6, AES Brasil (AESB3, Omega (OMGE3)), Engie Brasil (EGIE3, Copel (CPLE6) and Energias do Brasil (ENBR3. In relation to energy distribution, the most exposed names are: Equatorial (EQTL3) and Cemig (CMIG4) For the transmission segment, the companies fully dedicated are Transmissão Paulista (TRPL4) and Taesa (TAEE11).
For XP, the industry’s preferred stocks are Omega Geração and Cesp.
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