...The Latin American utilities neutral sector outlook is based on strong fundamentals that support broad underlying credit stability. Fitch Ratings expects energy demand across the region to increase by a moderate 2% in 2023, given the effect of subdued economic growth and higher cost pressures. Conservative commercial policies prioritizing contract sales over spot market sales will continue to shield utilities' revenue and cash flow by mitigating high exposure to volatile hydrologic conditions and commodity prices. Tariff indexation mechanisms generally included in power purchase agreements will allow utilities' cost structures to keep pace with inflation. The region also maintains good capacity levels relative to demand. Near-term capacity growth will occur largely on the margins through non-conventional renewable energy sources, mainly wind and solar. This type of capacity growth will help meet power diversification goals and support decarbonization initiatives promoted by governments...
