Opportunity Analysis of the Energy Management Services in Brazil

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The Brazilian energy management services (EMS) market is still in a nascent growth stage. However, competitors expect double-digit growth, mainly because of governmental incentives in energy efficiency programs. Customer awareness is expected to increase, although there is apprehension in investing in such long-term payback projects. Moreover, the funding offer, especially from the government, will have a considerable growth until 2017. In 2012, the market is estimated in US$ 697.3 million. Considerable growth is expected in the construction sector until 2016 as a result of the FIFA World Cup in 2014 and the Olympic Games in 2016.

Executive Summary

•Since 2001, after the electric power blackout in Brazil, the Brazilian government has been interested in structuring public policies to reduce energy consumption.

•The National Plan for Energy Efficiency (PNEF) and PROCEL, a national electricity conservation plan, are two government initiatives that are shifting the market. PNEF estimates a x xper cent energy consumption reduction per year through 2030.

•Financial barriers are still the main challenge for service providers. However, the Social and Economic Development National Bank (BNDES) is intended to offer credit to energy service companies (ESCOs) and to projects in the energy efficiency sector.

•Moreover, the National Electric Energy Agency (ANEEL) created a program for energy efficiency, which requires utilities to invest x x per cent of their net operational revenue in energy efficiency programs.

•Regulation that pertains to the free contracting environment is viewed as an opportunity for ESCOs to enter the market by first offering consulting services for migration and then by offering energy management and energy efficiency services.

•For 2012, the market size is estimated at $ x xmillion.

•Energy management services (EMS) are not yet a priority for Brazilian companies and are seen more as an expenditure than as an investment.

•The market's growth rate faced a slowdown due to the global financial crisis. Nonetheless, as an effect of the crisis, many foreign manufacturers have been investing in the Brazilian market, revealing a need for local companies to better prepare for these potential competitors.

•ESCOs and EMS companies in Brazil are still structuring themselves and the market: Most of the companies are in the southeast region, offer many different services, and have a contracting model that is not standardized.

•The arrival of foreign manufacturing companies has created an opportunity for small Brazilian companies to develop strategic partnerships (i.e., as retail sellers, by providing maintenance or technical assistance, offering complementary products, or initiating co-branding strategies).

•Brazilian EMS services still face a lack of qualified professionals, thus some companies do not have yet considerable technical and management expertise.

TABLE OF CONTENTS

Executive Summary 4

Market Overview 10

Total Energy Management Services Market -

•External Challenges: Drivers and Restraints 18

•Forecast and Trends 26

•Demand Analysis 33

•Market Share and Competitive Analysis 35

ESCOs, Installers, and Independent Consulting Firms Segment Breakdown 39

OEMs Segment Breakdown 44

Engineering and Architecture Companies Segment Breakdown 49

The Last Word (Conclusions and Implications) 54