Voltage Shifts: Impact of Brazil’s Grid Operator on Voltalia
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Production Curtailment Imposed by the Brazilian Grid Operator
Voltalia (Euronext Paris, ISIN code: FR0011995588), an international player in renewable energy, announces that the Brazilian transmission system operator is currently imposing a pronounced curtailment in certain parts of the network. This situation could significantly affect Voltalia's 2024 EBITDA if it persists over the coming months and if it remains unaddressed in terms of financial compensation. To mitigate these impacts, Voltalia is implementing a series of actions aimed at reducing the duration of curtailment while seeking financial redress.
Curtailment refers to the limitations placed on the transmission of electricity produced by a power plant, intended to maintain the stability of the transmission network. Such actions, which involve reducing the operational output of power facilities, have been infrequent in Brazil in previous decades. However, after a notable blackout in August 2023, the Brazilian operator initiated restrictions on production levels to reduce instability risks across the grid. Although the situation showed improvement and curtailment levels decreased towards the end of 2023, the recent resurgence of significant curtailment levels is concerning for Voltalia.
In response to this situation, Voltalia has engaged in multiple discussions with the Brazilian transmission network operator. The anticipated volume of production curtailment affecting Voltalia in the northeastern part of the network is projected to be substantial. This issue is exacerbated by delays in constructing new transmission lines that are crucial for bolstering the northeastern power grid.
As part of a collective effort by electricity producers and through professional associations, Voltalia is undertaking several initiatives in Brazil:
- Numerous litigation actions, initiated in 2023, are currently underway in both federal and local courts, aiming for financial compensation that specifically involves Voltalia's power plants.
- Parallel discussions are being conducted with the network operator and public authorities to expedite financial compensation and lessen the duration of current curtailment measures.
Voltalia remains optimistic about the efficacy of these efforts, though accurately predicting the financial impact of curtailment on the 2024 EBITDA proves to be challenging. Should the scenarios projected by the network operator materialize, and if Voltalia is not compensated financially, coupled with an average EUR/BRL exchange rate of approximately 6 in the latter half of the year, the company estimates a decline in its 2024 EBITDA of around 40 million euros.
In the first half of 2024, Brazilian curtailment remained low and aligned with Voltalia's projections. The company anticipates that its consolidated EBITDA for this period will be approximately 75 million euros, reflecting a 33% increase compared to the first half of 2023.
The ramifications of current curtailment measures in the latter half of the year are likely to be intensified by seasonal production dynamics, traditionally higher in this period, and favorable wind and solar conditions forecasted above the long-term average, based on data observed and predictions made since early July through the end of December.
Professional organizations, representing electricity producers including Voltalia, posit that the caution exercised by the network operator is not technically warranted. Thus, the associated loss of electricity production potential—detrimental to the Brazilian economy—could be avoided. They advocate for financial compensation for producers, corroborated through legal actions initiated.
Despite these challenges, Voltalia remains confident in finding both technical and financial resolutions. The company reaffirmed its 2027 objectives, particularly its normalized EBITDA target of approximately 475 million euros, which includes an estimated 430 million euros from energy sales.
Voltalia has set forth the following capacity objectives:
- For 2024, capacity in operation and under construction is anticipated to reach approximately 3.3 GW, with around 2.5 GW currently operational.
- By 2027, Voltalia aims to operate over 5 GW across projects in development, targeting around 4.2 GW in operational capacity.
Sébastien Clerc, Chief Executive Officer of Voltalia, stated, “Although we are surprised by the announcement of an abnormally high level of curtailment in Brazil, we are confident in the effectiveness of Voltalia’s collective and specific actions aimed at minimizing it and securing financial compensation. We will keep our shareholders informed of any progress.”
Next meeting: Half-year results 2024, with an announcement expected on September 5, 2024 (prior to market opening).
About Voltalia
Voltalia is an international player in renewable energies, producing and selling electricity from various sources including wind, solar, hydro, biomass, and storage facilities. The Group currently has 3.1 GW of capacity operational and under construction, alongside a portfolio of projects totaling 16.6 GW.
As a service provider, Voltalia offers comprehensive support to its renewable energy customers at every stage of project development, from design to operation and maintenance. As a trailblazer in the business market, it delivers a wide range of services, contributing to the supply of green electricity, energy efficiency improvements, and localized energy production.
With over 1,850 employees across 20 countries on three continents, Voltalia is positioned to respond globally to its clients' needs. The company is publicly listed on the Euronext regulated market in Paris (FR0011995588 - VLTSA) and participates in indices including Enternext Tech 40 and CAC Mid & Small, as well as the Gaïa-Index, a responsible mid-cap index.
Contact Information:
Voltalia
Email: invest@voltalia.com
T. +33 (0)1 81 70 37 00
Press Relations
Seitosei.Actifin - Jennifer Jullia
Email: jennifer.jullia@seitosei-actifin.com
T. +33 (0)1 56 88 11 19
Frequently Asked Questions
1. What is the main issue Voltalia is facing with the Brazilian grid operator?
Voltalia is experiencing production curtailment imposed by the Brazilian grid operator, which may significantly impact its 2024 EBITDA if it continues without financial compensation.
2. What actions is Voltalia taking in response to this situation?
Voltalia is pursuing litigation for financial compensation and engaging in discussions with the network operator and authorities to expedite compensation and mitigate curtailment duration.
3. How could the curtailments affect Voltalia's financial projections?
If not compensated, Voltalia estimates that its 2024 EBITDA could decline by around 40 million euros due to the prolonged curtailment.
4. What are Voltalia's capacity goals for the next few years?
Voltalia aims to achieve approximately 3.3 GW of capacity in operation and under construction by 2024, and more than 5 GW by 2027.
5. What are the seasonal considerations affecting Voltalia's production?
The impact of curtailments may be exacerbated in the second half of the year due to higher seasonal production rates and favorable weather conditions anticipated for wind and solar resources.
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