Now Available: Argentina Power Report Q3 2016
New Energy market report from Business Monitor International: "Argentina Power Report Q3 2016"
[USPRwire, Tue Jun 14 2016] The outlook for Argentina's power sector is improving steadily due to the reforms int roduced by the Macri government. The country will continue to suffer from tight power supply and a weak electricity infrastructure over the coming months , but w e expect the market to offer growing opportunities over the coming years as the government will prioritise plans to attract investment into new conventional and renewables power capacity.
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An increase in electricity tariffs, greater access to financing and a general improvement in the business environment will all benefit the Argentine power sector. While at present Argentina suffers from more than a decade of underinvestment in the distribution and power generation sector, the economic and industry-specific reforms introduced by the Macri government will create significant business opportunities in the country over the coming years.
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Our Country Risk team forecasts that the Argentine economy will contract 0.6% in 2016 as consumption falls in response to elevated inflation. Nevertheless, it expects rapidly improving investor sentiment to drive a strong economic rebound from 2017, with real GDP growth to average 4.3% between 2017 and 2021. In turn, this informs our forecast for power consumption in the country to rise at an average annual rate of 3.7% between 2016 and 2021.
The Macri government is creating the conditions for much greater financing availability for the power sector by reintegrating Argentina into capital markets and increasing investor confidence in the country. For example, representatives of the International Finance Corporation (IFC) said in May 2016 they are considering investing USD800mn in Argentina between now and December 2016, with renewable energy being a key target.
The government is undertaking initiatives that we expect to boost international investment into new power generating capacity. Crucially, it has announced it will hold auctions to contract both thermal and renewable energy projects over the coming months. As investor interest in the market is strengthening and the government is taking on currency risk by offering power purchase agreements (PPAs) in US dollars, we expect the auctions to prove popular. Investment in renewables will be supported by a number of incentives introduced by Argentina's new renewable energy law and enacted by the government in March 2016.
It was announced in May 2016 Brazil's national oil company (NOC) Petrobras has officially agreed to sell to Argentine public utility Pampa Energia its 67.2% stake in Petrobras Argentina. We believe the acquisition will benefit Pampa by consolidating the company's position in Argentina's electricity generation, refining and petrochemical industries - all segments for which we have a positive long-term outlook.
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