Brazilian Grid Operator Imposes Production Curtailment
Voltalia (Euronext Paris, ISIN code: FR0011995588), a global leader in renewable energy, has announced that the Brazilian transmission system operator is currently enforcing significant curtailments in specific areas of the network. If this situation continues over the next few months without financial compensation, it could have a major impact on Voltalia's EBITDA for 2024. To address these challenges, Voltalia is taking various steps to minimize curtailment duration while also pursuing financial redress.
Curtailment refers to the restrictions placed on the transmission of electricity generated by power plants, aimed at ensuring the stability of the transmission network. Such measures, which involve reducing the output of power facilities, have been rare in Brazil in past decades. However, following a major blackout in August 2023, the Brazilian operator implemented production level restrictions to mitigate risks of instability within the grid. Although there was an improvement and a decrease in curtailment levels towards the end of 2023, the recent rise in significant curtailment levels is alarming for Voltalia.
In light of this situation, Voltalia has been actively engaging in discussions with the Brazilian transmission network operator. The expected volume of production curtailment affecting Voltalia in the northeastern region is anticipated to be considerable. This issue is further complicated by delays in the construction of new transmission lines, which are essential for strengthening the northeastern power grid.
As part of a collaborative effort with other electricity producers and through professional associations, Voltalia is undertaking several initiatives in Brazil:
- Multiple litigation actions initiated in 2023 are currently in progress in both federal and local courts, seeking financial compensation specifically related to Voltalia's power plants.
- Ongoing discussions are being held with the network operator and public authorities to accelerate financial compensation and reduce the duration of current curtailment measures.
Voltalia remains hopeful about the effectiveness of these initiatives, although accurately forecasting the financial impact of curtailment on its 2024 EBITDA is challenging. If the scenarios projected by the network operator come to pass, and if Voltalia does not receive financial compensation, along with an average EUR/BRL exchange rate of about 6 in the latter half of the year, the company estimates a potential decline in its 2024 EBITDA of around 40 million euros.
In the first half of 2024, Brazilian curtailment levels were low and aligned with Voltalia's expectations. The company forecasts that its consolidated EBITDA for this period will be around 75 million euros, marking a 33% increase compared to the first half of 2023.
The effects of the current curtailment measures in the latter half of the year are likely to be magnified by seasonal production dynamics, which are typically higher during this period, along with favorable wind and solar conditions predicted to exceed long-term averages, based on data collected and forecasts made from early July through the end of December.
Professional organizations representing electricity producers, including Voltalia, argue that the caution exercised by the network operator is not technically justified. They believe that the resulting loss of electricity production potential—harmful to the Brazilian economy—could be avoided. They are advocating for financial compensation for producers, supported by the legal actions initiated.
Despite these challenges, Voltalia is optimistic about finding both technical and financial solutions. The company has reaffirmed its objectives for 2027, particularly its normalized EBITDA target of around 475 million euros, which includes an estimated 430 million euros from energy sales.
Voltalia has outlined the following capacity targets:
- For 2024, the expected capacity in operation and under construction is approximately 3.3 GW, with about 2.5 GW currently operational.
- By 2027, Voltalia aims to operate over 5 GW across its developing projects, targeting around 4.2 GW in operational capacity.
Sébastien Clerc, Chief Executive Officer of Voltalia, commented, “While we are surprised by the announcement of an unusually high level of curtailment in Brazil, we are confident in the effectiveness of both our collective and specific actions aimed at reducing it and securing financial compensation. We will keep our shareholders updated on any developments.”
Next meeting: Half-year results 2024, with an announcement expected on September 5, 2024 (prior to market opening).
About Voltalia
Voltalia is a prominent player in the renewable energy sector, generating and selling electricity from diverse sources including wind, solar, hydro, biomass, and storage facilities. The Group currently has 3.1 GW of capacity either operational or under construction, alongside a robust project portfolio totaling 16.6 GW.
As a service provider, Voltalia offers comprehensive support to its renewable energy clients throughout every stage of project development, from design to operation and maintenance. As a leader in the business market, it provides a wide array of services that contribute to the supply of green electricity, improvements in energy efficiency, and localized energy production.
With over 1,850 employees across 20 countries on three continents, Voltalia is well-positioned to meet its clients' needs on a global scale. The company is publicly listed on the Euronext regulated market in Paris (FR0011995588 - VLTSA) and is included in indices such as 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 dealing with production curtailment imposed by the Brazilian grid operator, which could significantly impact its EBITDA for 2024 if it continues without financial compensation.
2. What actions is Voltalia taking in response to this situation?
Voltalia is pursuing legal action for financial compensation and is engaging in discussions with the network operator and authorities to expedite compensation and reduce the duration of curtailment.
3. How could the curtailments affect Voltalia's financial projections?
If financial compensation is not received, Voltalia estimates that its EBITDA for 2024 could decline by approximately 40 million euros due to the ongoing curtailment.
4. What are Voltalia's capacity goals for the next few years?
Voltalia aims to achieve around 3.3 GW of capacity in operation and under construction by 2024, and over 5 GW by 2027.
5. What are the seasonal considerations affecting Voltalia's production?
The impact of curtailments may be heightened in the second half of the year due to increased seasonal production rates and favorable weather conditions expected for wind and solar resources.
