Energy Deals Newsbreak Latam | Ed. #37

Apr 16, 2025

Hello,

The past two weeks were marked by billion-dollar deals across Latin America's energy sector. Checks exceeding USD 1 bn have become increasingly common, particularly in Brazil, the region’s largest market. While dealmakers continue to seize opportunities amid global economic pressures, regulatory challenges are beginning to surface.

Brazil’s long-anticipated energy reform, seen as a key enabler for the already heating M&A landscape in 2025, is now facing political friction. Although some expect the proposal to reach Congress this April, internal disagreements within the government could delay or derail the process.

In this edition, dive deeper into the unfolding political gridlock—and explore the most relevant energy deals of the fortnight, including:

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Energy Deals Newsbreak Latam | Ed. #37

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M&A Renewables

M&A Energy

Investment & Financing Renewables

Investment & Financing Energy

Announced/Not confirmed

International

Petrobras accelerates its return to the international stage with new bets in Africa and South America

Fundraising

Market whispers

Brazil

LATAM

Energy reform moves forward in Brazil, but the landscape remains fragile

M&A activity in Brazil’s energy sector is expected to reach BRL 120 bn in 2025, according to estimates by Swiss bank UBS BB. Opportunities in Latin America’s largest power market are largely underpinned by growing demand: electricity consumption rose 10% between 2019 and 2023, according to the government-run Energy Research Company (EPE). And while 2024 data is still being consolidated, the EPE projects this upward trend will continue, with average annual growth of 2.1% in electricity consumption through 2034.

Despite the positive outlook for energy-related M&A, significant hurdles remain, especially in renewables. Recent data from asset manager Equus Capital shows that between July and October 2024, more than 22,000 GWh of wind and solar generation went unused. In practical terms, this curtailment affected the equivalent of 63% of all thermal generation in the same period.

Overcoming such bottlenecks requires not only capital, but also regulatory reform (a growing demand among Brazilian energy executives). And momentum seems to be building: a reform package could hit Congress as early as April.

Industry pushes for reform, but political hurdles persist

This month, Brazil’s Minister of Mines and Energy, Alexandre Silveira, voiced his support for submitting the electricity reform bill to Congress in April. However, between the ambition to boost competitiveness in the sector and the political risks of introducing structural change so close to the 2026 general elections, the proposal remains surrounded by uncertainty.

The government’s goal is to pass a “foundational” reform to fix longstanding distortions created by years of legislative patchwork—commonly referred to as jabutis, or legislative “pork.” But herein lies the challenge. Silveira said he will submit the proposal to the Chief of Staff for final internal approval. Yet, according to sources within the executive branch, there’s growing concern that pushing a bill of this magnitude through Congress could prove costly and politically risky.

One workaround being floated is to “break up” the reform package into smaller pieces, focusing on less controversial measures such as full liberalization of the energy market, regulatory modernization, and improved concession rules—rather than betting on a single, all-encompassing bill that could stall.

A likely starting point for the reform is the expansion of eligibility for social electricity tariffs. Minister Silveira has proposed free power for households consuming up to 80 kWh per month and the elimination of surcharges such as the Energy Development Account (CDE) for low-income families registered in Brazil’s federal social program. This could benefit up to 60 million people.

Still, the financing model for such expansion is a source of tension. The Ministry of Finance is wary of raising subsidies through the CDE or other primary sources, fearing this could either drive up electricity bills or force new taxes on the sector. While social assistance is essential, such measures could backfire by scaring off investors, defeating the reform’s very purpose.

This tension became evident when Finance Minister Fernando Haddad, immediately after Silveira’s announcement, publicly stated he was unaware of any proposal expanding the Social Tariff and questioned the feasibility of such a subsidy. The final word may fall to President Lula himself, as the government also sees the move as a potential populist lever to boost its approval ratings.

Reform seems inevitable, but the topic remains contentious

Few deny the urgent need to modernize Brazil’s electricity sector. The country is wasting clean energy on one end and underinvesting in infrastructure on the other, all while tariffs remain under constant pressure.

Although the national regulator projects a 3.5% average tariff increase in 2025 (below inflation levels) without a long-term fix, the sector risks falling deeper into a cycle of cross-subsidies, transmission bottlenecks, and complex pricing structures that hurt both consumers and businesses.

This sense of urgency is reflected in market expectations: dealmakers expect that tariff prices could rise by 10% (way beyond Aneel’s projections), and without tax relief, this growth not only burdens consumers but also undermines business competitiveness.

A broad reform package must be the result of active engagement with all relevant stakeholders. A rushed approval risks producing more legislative “patches” rather than real solutions.

Whether the government moves forward with a comprehensive bill or opts for the more cautious, piecemeal approach advocated by parts of Congress, one thing is clear: the debate must not be overshadowed by electoral convenience. The energy reform is more than a behind-the-scenes political maneuver; it directly impacts Brazil’s economic competitiveness and regional growth prospects, especially in this sensitive moment of rising energy costs.

General Landscape

Brazil

LATAM

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