Now Available: Venezuela Power Report Q4 2013
Fast Market Research recommends "Venezuela Power Report Q4 2013" from Business Monitor International, now available
[UKPRwire, Tue Sep 17 2013] Despite a small number of power projects coming online over the past year, resulting in a relatively robust growth in net capacity for 2012 (particularly in terms of thermal capacity), Venezuela is still significantly underperforming its regional peers. The country's business environment is notably unattractive, with high levels of corruption, an opaque tendering process and extremely low levels of liberalisation within the power market. Furthermore, electricity output from successfully commissioned plants is at the mercy of Venezuela's aging and inefficient T&D infrastructure - with power outages still a pressing concern for the majority of the population.
Over the past year, Venezuela's power market has swelled in terms of capacity. For instance, according to a report from Bnamericas, 1.07GW have been brought online since energy minister Jesse Chacon announced the short-term plan at the beginning of May 2013, after President Nicolas Maduro declared a state of emergency for the power sector for 90 days in April
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This notwithstanding, our grim outlook for the Venezuelan power sector remains in place. In order to meet demand, which averages between 17GW and 18GW, Venezuela has an installed capacity of approximately 28GW; however, only 20GW are currently operational. Yet, the country's business environment continues to present sizeable risks to investment (both industry and country specific). Under Chavez, private enterprise was asphyxiated and rigidly controlled tariff rates led to a lack of capital for investment in sufficient capacity, and in spite of repeated promises by the government, delays and problems with funding continue to represent an obstacle to capacity development and improvements to the transmission and distribution (T&D) system in Venezuela.
In light of this, we note that:
* Venezuelan Electricity Minister, Jesse Chacon announced in June 2013 that diesel-fuelled capacity will be boosted significantly over 2013, with roughly 1.2GW of capacity added by the end of the year. With the country continually suffering from blackouts, stemming from inadequate hydropower output (primarily as a result of drought) and inefficiencies within the power network, the move is aimed at stabilising power supply within the country. However, prolonged reliance on diesel-fired capacity could hinder oil export revenues.
* Macroeconomic and political risk factors continue to weigh heavily on the sector. BMI's Country Risk analysts expect near-recessionary economic conditions to prevail over the coming quarters, characterised by a slowdown in private consumption and exports. Additionally, they believe recently-elected President Nicolas Maduro will struggle to exert his grip on power in a highly polarised political landscape. A cocktail far from conducive for significant long-term investments.
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