The price of drought: effects of water crises on the Brazilian electricity sector

Abstract

In recent decades, Brazil has suffered from water crises of various origins and consequences, which can potentially affect the economic and financial performance of companies belonging to the electricity industry. In this sense, this study aimed to evaluate the possible effects of water crises on the economic and financial performance of companies in the Brazilian electricity sector, in the period from 2014 to 2021, specifically evaluating possible implications in the segments of generation, distribution and transmission of energy electric. Three companies from each segment, belonging to the Electric Energy Index [IEE B3] were analyzed. The data needed for the study were collected from the companies’ standardized financial statements, obtained through the B3 website. Thus, the study demonstrated that the water crisis may have impacted the performance of the companies analyzed in terms of capital structure, profitability and market value indicators. Furthermore, it was found that generation and distribution companies may have been the most impacted by these crises, while power transmission companies did not show evidence of significant effects.