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Chinese, Europeans win Brazil hydro assets

27 Sep 2017, 6.14 pm GMT

Chinese, Europeans win Brazil hydro assets

Sao Paulo, 27 September (Argus) — Chinese and European energy firms picked up four hydroelectric concessions in one of Brazil's largest auctions for electricity assets.

The government raised a total of R12.1bn ($3.8bn), an average of nearly 10pc above the combined minimum prices for the four plants.

The winners will operate and maintain the four active plants for 30 years, with 70pc of the power supply earmarked for the regulated market and the balance for the non-regulated market.

For Romeu Rufino, head of Brazil's energy regulator Aneel, the auction results show that Brazil's electricity sector remains attractive thanks to a solid regulatory framework.

SPIC Pacific Energy, controlled by Pacific Hydro Brasil, a subsidiary of China's state-owned State Power Investment Company (SPIC), won the 1.7GW Sao Simao hydroelectric plant on the Parnaiba river, the largest of the four plants.

SPIC Pacific Energy offered R7.18bn for the plant, a 6.5pc premium on the minimum bid of R6.74bn stipulated by the government. It was the only bidder for the asset.

The award augments the Chinese presence in Brazil's energy sector. In a November 2015 hydroelectric concession auction, China Three Gorges (CTG) acquired the Jupia (1,551MW) and Ilha Solteira (3,444MW) plants.

The acquisition significantly increases Pacific Hydro Brasil's generation capacity in Brazil, which currently totals 58MW. Since April, SPIC has owned a 100pc stake in Pacific Hydro.

Engie Brasil Energia, the Brazilian subsidiary of French energy firm Engie, won the 424MW Jaguara plant on the Grande river and the 408MW Miranda plant on the Araguari river.

Engie offered R2.17bn for Jaguara, a 13.6pc premium on the minimum price of R1.91bn. Engie's bid of R1.36bn for Miranda was 22.4pc above the ceiling price of R1.29bn.

Engie outbid Italian energy company Enel for both assets.

But Enel picked up the 380MW Volta Grande plant, also located on the Grande river, for R1.42bn, 9.8pc above the minimum price of R1.29bn. Enel was the sole bidder.

The three winning companies highlighted their commitment to Brazil's power sector.

Absent from the auction was Minas Gerais state-controlled utility Cemig, which has waged a long battle to maintain the four hydroelectric plants.

Earlier this month, mining giant Vale confirmed that it was considering making a joint bid for the hydro plants through its energy joint venture Alianca Geracao, in which Vale has a controlling 55pc stake and Cemig, the remaining 45pc.

Cemig says it will continue its legal battle to retain the assets, which it says it is legally entitled to operate for another 20 years.

For Paulo Pedrosa, executive secretary of the mines and energy ministry, the sale of the four plants is unlikely to be overturned. Pedrosa said Cemig has been fighting to keep the plants since the concession renewal program was announced in 2013 under former president Dilma Rousseff, but has been unsuccessful.

Cemig workers protested the sales on the sidelines of today's auction.


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