Brazilian energy market: accounting aspects for seizing the new opportunities

EXPERT OPINION

Brazilian energy market: accounting aspects for seizing the new opportunities


Considering strategic accounting aspects is essential for companies arriving in Brazil or those already established, looking for ways to expand their activities at this time in which the energy market is opening up.


By Rodrigo Pimentel


The energy sector is in the spotlight this year, after the opening of the Gas sector (Act 14.134/21) and the set of auctions expected to be held involving wind, photovoltaic, hydroelectric and thermoelectric enterprises. Among them is the New Energy Auction A-3 and A-4, scheduled for July 8, and the New Energy Auction A-5, scheduled for September 30.

Eletrobras' privatization proposal is also advancing and attracting attention to new opportunities in Brazil. With the approval of the Chamber of Deputies' amendments, on June 21, the project awaits presidential sanction. Besides addressing the model for sale of the company's shares, the text also provides for the purchase of reserve energy from gas-fired thermoelectric plants, even in regions where there are no gas pipelines yet, which may stimulate the construction of new networks.

At the same time that the sector is experiencing this time of great expectation regarding the arrival of new players, the country advances in the tax reform discussion and the post-pandemic economic recovery is strengthened.

The Brazilian scenario is welcoming, but planning is needed in order to seize the opportunities and overcome challenges that still exist, such as the cost for maintaining tax and accounting compliance, especially in the energy sector, a market that became attractive recently in Brazil.

Read also: New Gas Law: opportunities and challenges for the businesses in this sector




Strategic accounting processes


Enterprises in the energy sector usually require long-term plans, which often take decades to be concluded. When planning generation, transmission or distribution projects, it is essential to plan each step.

Consultive accounting supports energy businesses by offering solutions that not only ensure compliance but also present paths, direct actions, help to establish financial and economic balance and prepare for the future.

Check how some strategic processes are important in supporting companies:


Property planning and control

The energy sector naturally involves significant investments and large facilities and equipment, which reinforces the need to make safe choices for business management.

The property control must be carried out based on international standards. This accounting process ensures security when managing fixed and intangible assets, besides helping with definitions and planning based on the periodic updating of equity, and factors such as depreciation and new needs.


Financial statements

Financial statements are reports that reflect the company's financial and economic performance. This material ensures transparency of information such as revenue, gross and net profit, expenses and investments.

The main point is to use this information presented in the financial statements (in the monthly analysis of information included in the report) for management control from the very first steps of the business, ensuring more financial predictability.


Transfer Pricing

When planning their business, multinational companies should also consider transfer pricing implications, ensuring that information related to this is always consistent, complete and up-to-date.

Transfer pricing is a method applied in transactions between parties of the same economic group, when one of them is located abroad. The rules aim at the correct allocation of profit in transactions, balancing the tax bases of the jurisdictions involved and eliminating possible distortions in the relationship between these companies.

Read more: Transfer price: efficiency of the process should be on the tax agenda of multinationals


Functional Currency

The currency in which the company will record its transactions does not necessarily need to be the national currency. From an accounting perspective, the records must be done in functional currency, which may be any country's currency (provided that certain criteria are met). Part of the strategic management, with accounting assistance, consists in defining which currency will be adopted, which must take into account the business situation, the economic context, specific indicators and the reference standards.


Tax and accounting advisory support


Action planning in the tax and accounting areas is fundamental for companies arriving in Brazil at this time in which the energy market is opening up to new players. Relying on partners who have solid experience, sector knowledge and performance focused on personalized service makes a difference when building the foundation of a business.

Domingues e Pinho Contadores multidisciplinary team is ready to support energy sector clients in implementation stages, in the pre-operational stage, in development processes, in consolidation and acquisition plans, in integration projects or other strategic decisions.



Author: Rodrigo Pimentel, partner at Domingues e Pinho Contadores.



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