In recent months, a series of bankruptcy filings has drawn the attention of the energy market. Companies that for decades operated in the buying and selling of energy have begun to face financial difficulties amounting to billions of dollars, raising the question: what happened to the energy trading companies?
The answer involves profound changes in how energy is priced in Brazil, transformations in the national electricity matrix and, according to experts, risk management errors that have become more evident in an environment of more volatile prices.
What does an energy trading company do?
Trading companies act as intermediaries between generators and consumers. They buy energy from power plants and resell it to companies operating in the free market.
The business model seems simple: buy energy at one price and sell it at a higher price, making a profit on the difference. In practice, however, it is an activity based on risk management.
These companies need to make bets on the future behavior of energy prices. Depending on the strategy adopted, they may be more exposed to market ups or downs. When these projections do not materialize, the losses can be significant.
For more than two decades, the sector managed to operate with relative stability. But this scenario has begun to change in recent years.
The arrival of hourly pricing
One of the main milestones in this transformation was the implementation of the hourly PLD in 2021. The PLD (Price of Settlement of Differences) is the reference used to settle the differences between the contracted energy and the energy actually consumed or generated.
Previously, the price was calculated based on load levels throughout the week. With the hourly PLD (Price of Energy in the Spot Market), CCEE (Chamber of Electric Energy Commercialization) began publishing a specific price for each hour of the following day.
The change was driven by the transformation of Brazil's electricity matrix itself. Historically, the system was mainly based on hydroelectric and thermal power plants, sources with more predictable production. In recent years, however, the share of solar and wind power has grown rapidly.
Since the generation from these sources varies according to the sun and wind, prices began to fluctuate much more throughout the day. The goal of the hourly PLD (Price of Energy in the Spot Market) was precisely to bring the financial market closer to the physical reality of the electrical system, making prices better reflect the operating conditions of the grid.
It was in this new environment that some of the problems faced by energy trading companies arose. One example frequently cited by the sector involves solar energy contracts.
A photovoltaic power plant generates energy mainly during the day, a period when prices are usually lower due to high supply. Many consumers, however, purchase energy through contracts with a constant supply throughout the 24 hours.
In practice, the energy supplier receives cheap energy during the day, but needs to buy additional energy on the market to supply its customers at night, when prices are often higher.
This mismatch between generation profiles and consumption profiles began to have a much greater financial impact after the adoption of hourly pricing.
The impact of the Newave Hybrid
Another change highlighted by companies occurred in January 2025, with the adoption of the so-called Newave Hybrid. Newave is one of the computational models used to calculate energy prices in Brazil. It considers variables such as reservoir levels, rainfall forecasts, energy demand, and the need to dispatch thermal power plants.
The main change was the way hydroelectric reservoirs began to be represented in the calculations. Previously, they were modeled in a more aggregated way. With the Newave Hybrid, they began to be analyzed in a more individualized manner, increasing the level of detail in the model.
Simultaneously, the risk aversion parameters used in price formation were also changed. The system adopted the so-called CVaR 15/40. In simple terms, this means that the model now assigns greater weight to the most unfavorable hydrological scenarios, making price formation more conservative.
According to several market participants, the combination of these changes contributed to increased price volatility and higher costs for uncontracted exposures.
The thesis of the trading companies
Companies that have resorted to bankruptcy protection argue that these changes have profoundly altered the historical dynamics of the market.
According to this view, mechanisms that previously allowed for financial offsets between positive and negative exposures no longer function in the same way, reducing the economic predictability of operations.
According to these companies' assessment, the result was a significant increase in financial risks and a rise in capital requirements to sustain their operations.
The effects are already showing in the numbers. A survey released by CNN Brazil indicates that the main energy trading companies affected by the crisis have accumulated approximately R$ 8,6 billion in debt to generators, consumers, financial institutions, and other agents in the sector.
Among the largest liabilities are:
- 2W Ecobank: R$ 2,2 billion;
- Trader: R$ 1,7 billion;
- Electra: R$ 1,3 billion;
- Electron Energy: R$ 1,1 billion;
- Gold Energia: R$ 1,1 billion;
- Brasil Comercializadora: R$ 335 million;
- América Energia: R$ 227 million
- Energy Differential: R$ 155 million;
- Argon energy: R$ 125 million.
Lack of adaptation or regulatory problem?
Not everyone agrees with the trading companies' argument. For Ricardo Lima, consultant and former CCEE advisor, the main problem was the inability of some companies to adapt their business models to the new pricing environment.
According to him, many trading companies continued selling contracts with constant supply throughout the day without developing adequate mechanisms to protect against market fluctuations.
“Hourly pricing arrived, but many companies continued operating as if the market still functioned the same way as before. In several cases, there was excessive exposure to risk, insufficient credit analysis of counterparties, and a lack of financial protection mechanisms,” he said.
According to the professional's assessment, the previous period offered high margins of error and allowed mistakes to be absorbed more easily. When volatility increased, the weaknesses became apparent.
Nivalde de Castro, professor at the Institute of Economics at UFRJ and coordinator at GESEL (Study Group of the Electric Sector), in turn, points out that "many companies did not adjust their strategies, did not reduce margins, nor build financial reserves to face adverse times. When prices began to fluctuate more strongly, these vulnerabilities became more evident," he said.
According to him, the regulatory changes were not created to harm energy trading companies, but to adapt the sector to the new reality of the energy transition. “With the expansion of solar and wind power generation, the cost of energy has begun to vary much more throughout the day. Pricing models needed to incorporate this new dynamic to better reflect the actual functioning of the system,” he commented.
According to the professor, companies that own their own generation assets tend to gain a competitive advantage because they can better manage their risks and ensure greater security in their energy supply. "Vertically integrated trading companies, which also own generation facilities, tend to have more tools to manage these fluctuations. This could lead to greater market concentration in the coming years," he pointed out.
Defaulting on payments worsened the problem.
The financial deterioration of some companies also triggered a chain reaction. Fearing further defaults, generators began adopting stricter criteria when selling energy to independent traders.
This reduced the supply of credit and contracts available to some agents, worsening the sector's liquidity crisis. With less access to energy and less competitive contracting conditions, many companies faced even greater difficulties in meeting their financial obligations.
According to Castro, the process tends to accelerate natural selection among market participants. “The sector is undergoing a structural change. Companies that took on excessive risks or sold more energy than they could handle are encountering difficulties. At the same time, players with more robust portfolios and generation assets tend to gain ground,” he said.
Despite the increasing volume of judicial reorganizations, experts believe there are no signs of systemic risk to the free energy market. The debate, however, remains open: on one side, trading companies argue that regulatory changes have significantly increased the financial exposure of their operations.
On the other hand, analysts argue that the crisis reveals the need for more sophisticated risk management models in a sector increasingly influenced by the variability of renewable energy sources. The consensus is that the free market has entered a new phase.
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