Boston, MA -- (SBWIRE) -- 03/04/2013 -- BMI View: Whilst the inclusion of new historic data has led to a significant revision of our estimates for 2011 as well as of our short-term forecasts, our relatively bearish view for Venezuela power sector remains unchanged on account of macroeconomic and sector-specific dynamics. Imbalances between supply and demand in Venezuela's National Electricity System (SEN) continue to plague the country's electricity market, with electricity shortages and power rationing also hindering its economic performance. In addition, following President Hugo Chavez's re-election in October 2012, BMI anticipates a continuation of his unorthodox policies, which will heighten economic imbalances and keep social tensions elevated in Venezuela.

In spite of repeated promises by the government, delays and problems with funding continue to represent an obstacle to capacity development and improvements to the transmission and distribution (T&D) system in Venezuela, effectively capping short-term potential:

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- Venezuela continues to rely largely on a combination of imported energy and programmed power cuts to cope with demand as the system displays its inadequacy. Delays in project implementation are also widespread, losses during power transmission are a concern, and theft is a considerable issue, with 30% of electricity illegally stolen, according to government calculations. A bleak short-term picture further obfuscated by Venezuela's macroeconomic outlook and poor business environment. Although BMI revised our 2012 real GDP growth forecast for Venezuela from 4.7% to 5.3% following a recent data revision by the central bank, our Country Risk analysts anticipate a continuation of unorthodox policies which will heighten economic imbalances and keep social tensions elevated in the country following President Hugo Chavez's re-election in October 2012. A deterioration of the country's key oil sector is also expected to reduce the government's ability to continue to finance growth.

Additionally, low levels of transparency, and liberalisation, coupled with high corruption and a volatile political picture will continue to hinder investment, as highlighted by Venezuela's tail ender position in BMI's Power Risk/Reward Ratings. With regard to the medium and long term, we note that upside and downside risks are both at play, influenced by a number of interrelated variables. Most notably, the growing gap between demand and supply is likely to force the government into action. Yet, the cohesiveness of any intervention is far from assured.

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