A Voltalia announced that the ONS (National Electric System Operator) is currently imposing a restriction pronounced in certain parts of the network – which could result in an impact of 40 million euros in 2024 EBITDA of the company if it is extended in the coming months and if it is not financially compensated.
For a transmission system operator, the courteous, technically called “curtailment”, consist of limiting the transmission, for a certain period, of all or part of the electricity production potential of a plant, in order to maintain the stability of the transmission network.
In Brazil, as in other large global electrical grids, This type of cut has been rare in recent decades. However, following a blackout in August 2023, the ONS began limiting an abnormally high share of production to minimize the risks of instability. As the network proved stable, the cut gradually decreased until it became marginal in late 2023.
Observing the resumption of a sharp level of production reduction, the Voltalia met with the Operator several times. The company's production reduction volume in the northeast of the grid could be expanded for a period that could last several months, especially due to the delay in the construction of new transmission lines to strengthen the grid in the northeast of the country.
A Voltalia is currently carrying out a series of initiatives in Brazil, within a collective of energy producers and through professional associations, in addition to directly:
- Various lawsuits, initiated in 2023, are ongoing before federal and local courts, with the law providing for financial compensation applicable, in particular, to Voltalia plants;[1]
- Constructive discussions are being held in parallel, with the network operator and public authorities, in order to accelerate at least part of the financial compensation and reduce the duration of the current generation limit.
The company stated that it is confident in the effectiveness of these measures, but it is difficult to establish a precise value for the financial effect of the production reduction on 2024 EBITDA. Voltalia estimates that, if the scenario communicated by the network operator is confirmed, if Voltalia is not financially compensated and if the average EUR/BRL exchange rate for the second half of the year remains around 6, its 2024 EBITDA would be reduced by around 40 million euros.
In the first half of 2024, the forced cut in Brazil was low and in line with Voltalia's forecasts. The company expects a consolidated EBITDA for the Group of around 75 million euros[2] in the first half of 2024, an increase of +33% compared to the first half of 2023.
In the second half of the year, the impact of the current power generation limit would be accentuated by the seasonality of production, which is traditionally greater in the second half than in the first, and by wind and solar resources, which are expected to be above average long-term in the second half of 2024, given the levels observed since the beginning of July and forecasts until the end of December by weather forecasting institutes.
Professional organizations that bring together energy producers, such as Voltalia, consider that the extreme caution applied by the grid operator would not be technically necessary. The negative economic consequences of this approach, with the loss of electricity production potential, would therefore be avoidable. Furthermore, the lack of financial compensation is not in accordance with the law.
Voltalia is confident that technical and financial solutions will be found. The company therefore reaffirms its ambitions for 2027, in particular its target of normalized EBITDA[3] of around 475 million euros, of which around 430 million euros will come from Energy Sales.
The company also reiterates its capacity objectives:
- In 2024: capacity in operation and under construction of approximately 3,3 GW, of which approximately 2,5 GW in operation;
- In 2027: more than 5 GW in operation and under construction, of which around 4,2 GW in operation.
“While we are surprised by the announcement of an unusually high level of forced curtailment in Brazil, we are confident in the effectiveness of Voltalia's collective and specific actions aimed at minimizing it and obtaining financial compensation. We will keep our shareholders informed as progress is made,” he said Sébastien Clerc, CEO of Voltalia.
[1] Relative to the 2023 and 2024 cuts.
[2] Results for the first half of 2024 will be announced on September 5, 2024 (before market opening). The s, whose audit procedures are ongoing, have not yet been finalized. The numbers presented are estimates.
[3] “Normative EBITDA” estimated on December 31, 2027, calculated with an average annual exchange rate of 5,5 EUR/BRL and wind, solar and hydraulic production corresponding to the long-term average.
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