EXPLAINER-Why Brazil could strip Enel of the power contract in its biggest city

Enel, one of the biggest utilities in ​Europe, on Tuesday faces a potential regulatory challenge to its ​lucrative contract to supply electricity to the largest ‌city ​in the Southern Hemisphere.

Brazil's electricity regulator, Aneel, has scheduled a meeting on October 6 to discuss whether to recommend termination of the Italian power company's licence to distribute electricity across metropolitan Sao Paulo before ‌its 2028 expiry date. WHAT IS ANEEL DOING?

The potential contract forfeiture is the harshest penalty Aneel can impose over a utility contract and has never been deployed before. The watchdog opened proceedings against Enel São Paulo, Brazil's second-largest power distributor, in April.

The business delivers electricity to about 8.5 million homes and businesses. ‌Losing the concession would be one of the biggest regulatory shake-ups in the country's power sector in decades. WHAT LED TO THIS?

Aneel cites ‌a sustained pattern of failures after severe weather left millions of homes and businesses without power over the period from 2023 to 2025. In December 2025, power outages affected a cumulative total of 4.2 million homes and businesses, the watchdog said, representing more than half of Enel São Paulo's customer base. Enel says the proceedings focus on a single ⁠weather event ​in December 2025 and do not take ⁠into account improvements made over the past two and a half years, reaching fifth place in Brazil's service quality rankings in terms of average emergency response time, up from ⁠31st place in 2023.

Enel also disputes some of Aneel's methodology for calculating customer disruption and reconnection times. Enel has had to pay about 59 million reais ($11.8 ​million) in fines and undergone improvement plans, but 262 million reais remains unpaid due to court suspensions.

WHAT NEXT? Aneel will discuss on Tuesday ⁠whether to recommend that Brazil's energy and mines ministry should revoke Enel's licence. The final decision rests with the ministry, but the government could instead take the case to Brazil's ⁠federal ​audit court to seek a mediated settlement with Enel.

It is not clear how a runoff between right-wing Brazilian Senator Flavio Bolsonaro and leftist President Luiz Inacio Lula da Silva in Brazil's presidential election this month could affect the final decision. WHY IS IT IMPORTANT?

Brazil is Enel's largest ⁠market in Latin America. The group plans to invest about $5.3 billion in Brazil from 2026 to 2028, mostly in distribution networks, according to the ⁠Enel Americas business plan. Enel Sao Paulo ⁠generated about 3% of Enel Group's €22.9 billion total core profit in 2025.

HOW MUCH IS THE CONTRACT WORTH? Assets relating to the contract were worth €3.9 billion ($4.4 billion) at the end of last year, including €595 million of goodwill.

($1 = ‌4.9934 reais) ($1 = 0.8921 ‌euros)