Brazilian OTC energy – ended August with an unprecedented milestone in its operations: R$ 10 billion in outstanding energy derivatives. The figure represents a 230% jump over the same period last year and consolidates the expansion of risk management instruments in the Brazilian power sector. This corresponds to 56 TWh — enough to meet around five weeks of Brazil’s entire energy consumption.
The derivatives transactions currently registered on BBCE’s over-the-counter market consist mostly of non-standardized hedging contracts against price risk between submarkets and against wind and solar generation risk, including curtailment, i.e. the interruption or reduction of generation by the system operator.
According to Camila Batich, CEO of BBCE, reaching this milestone is not only a record for BBCE but also a clear sign that the derivatives market is advancing and that the power sector is maturing. “Market participants have realized that volatility and operational challenges, such as curtailment and regional price decoupling, call for efficient hedging tools,” she explains.
Camila Batich adds that the Brazilian Tax Reform will reduce the accounting cost of this type of transaction, which should foster greater interest among market participants in using this mechanism to protect their balance sheets. “Being at the center of this transformation, providing the security and infrastructure the sector needs to protect its assets and grow with financial sustainability, is the true meaning of this achievement,” she stresses.
