Energy Deals Newsbreak LATAM | Ed. #34

Mar 05, 2025

Hello,

Solar energy is a fast-growing sector, but it might also be causing a lot of people to lose money.

Whether it’s because of production costs or its clean footprint, you’ve already been following on Energy Newsbreak how this modality is gaining prominence in Latin American M&A. But fresh data shows that there might be a sting in the tail.

The culprit? The very growth of this energy source.

Brazil, the region’s largest market, could face losses exceeding BRL 4 bn due to grid overload caused by surplus energy from distributed generation. Even the obvious solution (investing in storage) doesn’t seem so straightforward.

In this edition, we dive into this issue while also bringing you the standout deals in the region, such as:

Cemig sells plants to Âmbar for BRLm 2
GreenYellow Colombia acquires and inaugurates the 9.9 MW Jeques solar park
Nightingale Partners acquires Horus and expands its renewable energy operations

Enjoy the read!

Energy Deals Newsbreak LATAM | Ed. #34

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How did the global M&A landscape look in 2024?

After two years of slowdown, M&A closed out 2024 with renewed momentum. PitchBook’s 2024 Annual Global M&A Report, sponsored by Ideals, highlights how increased liquidity and declining global interest rates fueled dealmaking during this period.

📌 Check out the key sectors that drove the strongest growth
📌 Discover how valuations are shaping up and the opportunities they present
📌 Dive into the rising share of private equity in total transaction value

The study also projects an optimistic outlook for 2025, as markets transition to a more “risk-on” stance following one of the most turbulent periods since the global financial crisis.

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M&A in Renewables

Investment & Financing in Renewables

Investment & Financing in Energy

Ecopetrol invested USDm 35.3 in a plant to produce diesel in Barrancabermeja

Deals Announced/Not Confirmed

International

Fundraising

Market whispers

Brazil

LATAM

Mexico

Pirates' attack platform in Campeche, confirms Pemex

You may be losing money with solar energy

It’s no secret that the solar market is booming in Latin America. If you follow M&A Community, it’s almost impossible to go through an edition without seeing transactions involving solar assets in the region.

In this recent two-week period, for example, we saw the French company GreenYellow acquiring 9.9 MW of solar parks in Colombia, illustrating the cross-border interest this sector generates.

However, in these last two weeks, the key insight we want to highlight focuses on the Brazilian market. Solar M&A activity in the region grew by 76% in 2024, standing out as one of the fastest-growing intermittent sources in the country over the past few years. Yet the rapid expansion of distributed generation (DG) seems to be causing an unintended problem.

Excessive growth in solar power injection into electricity grids is actually causing financial losses. A survey by FMDG revealed that, in the Brazilian state of Minas Gerais alone, around 1,200 solar energy companies had their connection requests blocked by Cemig, resulting in BRL 4 bn in uninstalled projects.

The situation has escalated to the point that other regions, such as Rio Grande do Sul, now only allow surplus solar power to be fed into the grid at specific times to avoid overloading the system.

According to representatives of the Brazilian Association of Energy Storage Solutions, the end consumer ultimately bears the cost. In an optimized scenario, the savings could amount to BRLm 900 per gigawatt, but that still seems a distant prospect. On the other hand, the ONS estimates that, by 2028, renewable energy waste could reach up to 50 GW.

Is investing in storage really the solution? The answer may not be so straightforward.

You might think the solution is to simply invest in storage. But reality can be more complex.

In Brazil, the consumer battery storage market alone is expected to require investments of over BRL 22.5 bn by 2030, according to a recent Greener report. The trend is for this amount to grow further, given that solar participation continues to rise while currently accounting for only 20% of the Brazilian energy mix.

Measures are already being taken. As shown in the chart below, investments in storage in Brazil grew by at least 29% (270 MW) in 2024 compared to 2023.

This growth occurs despite various challenges. The tax burden on batteries in Brazil, which includes levies such as PIS/Cofins and IPI, creates an unfavorable scenario for solar energy, especially when compared to other sources.

For example, without considering state-level taxes, battery energy storage systems (BESS) in Brazil currently face a total tax rate of 41%. Meanwhile, gas-fired plants enjoy special regimes and fiscal incentives that reduce their tax rates to zero for fuel purchases.

On the international scene, however, players like the United States, China and Chile have gained strength in the segment, accounting for up to 90% of the total investment in storage during the latest period.

Regulatory hurdles and limited access to capital also affect the rest of Latin America. Still, some initiatives aim to turn this scenario around. In September of last year, for example, the Brazilian government launched a public consultation to gather input on including storage in the 2025 Capacity Reserve Auction. Yet despite growing pressure, no concrete measures have been announced so far.

From an M&A perspective, the situation points to a balancing act. While investing in storage can present a crossroads due to costs and bureaucracy, it can also be the key to maximizing ROI on ongoing projects.

We’ve seen similar developments over the past two weeks. Argentina announced a 500 MW battery storage auction, while RIC is developing a 210 MW project in Chile emerging as a strong regional player in the segment.

The trend is clear; all that’s left is to be prepared to seize the opportunity.

This newsletter is brought to you by Ideals. Get in touch to share a deal or market rumors: pelayo.mateache@idealscorp.com

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