Brazil’s Eneva eyeing energy auction in August

Power generation and trading firm Eneva plans to participate in Brazil’s 2024 backup capacity tender, the company's executive director for marketing, commercialization and new business, Marcelo Lopes, told BNamericas. 

A public consultation carried out by the government suggests holding the auction in August and proposes three products: one for energy delivery on July 1, 2027 (with a seven-year contract) and two for delivery on January 1, 2028 (with 15-year contracts). 

Lopes noted that the auction is an important step both for renewing power plant contracts and as an opportunity for Eneva to expand.  

"In Maranhão, the Parnaíba I and Parnaíba III plants have their energy sales contracts expiring in December 2027 and can participate in the eventual product with the start of supply in 2028, with a view to being re-contracted for an additional 15 years," he explained.

"In Sergipe, we have expansion projects with new thermoelectric plants taking advantage of the competitive advantages of our LNG terminal," he added. 

He also said that the Sergipe terminal is well positioned regarding the new LNG regasification terminals that have recently opened in the country. 

Among the reasons for this is the fact that the terminal's anchor customer is the Porto Sergipe thermal plant, which is contracted under the 60-day advance dispatch regime of national power grid operator ONS. 

"This adds a lot of predictability and greatly optimizes LNG cargo management, avoiding extremely costly inefficiencies," Lopes explained.  

Another important factor, according to the executive, is that the terminal is in the area of influence of the northeastern development superintendency Sudene, which could have significant benefits compared with terminals in the southeast and south.

"And our location and connection to Transportadora Associada de Gás TAG, which has already been made feasible, provides a great opportunity to generate value by selling gas on the grid, compared with off-grid terminals," he underscored. 

CONSUMPTION

Lopes believes that thermoelectric demand for gas is likely to grow in the coming months due to lower precipitation, which has reduced the water levels of hydroelectric reservoirs at the end of the rainy season compared with last year. 

"This naturally means that the availability of hydroelectric generation is lower and consequently indicates a greater likelihood of the need for complementary thermoelectric dispatch," he said. 

He pointed out that extreme weather events, as seen in the case of the drought in the north region of the country, require greater resilience from the electricity and energy supply. 

"We understand that Eneva's diverse portfolio of supply solutions fits this profile well, with R2W [reservoir-to-wire] solutions, small and large-scale LNG, on and off the grid," said Lopes. 

“We can say that we add energy resilience to help the country deal with extreme weather events.”

NEW CONTRACT

Eneva has signed a natural gas supply contract with Linhares Geração, which is responsible for operating and maintaining a thermoelectric plant in Espírito Santo state. 

With a supply volume of up to 1.07Mm³/d (million cubic meters per day), this is the first contract for the sale of natural gas to a thermal plant signed by private agents.

The gas supply, in a flexible format, will be for the Luiz Oscar Rodrigues de Melo Thermoelectric Plant (UTE LORM), which has an installed capacity of 204MW and is located in the municipality of Linhares. 

The contract is valid for 15 years, with supply starting on July 1, 2026. 

The gas will be supplied mainly from a floating storage and regasification unit (FSRU), with a capacity of up to 21Mm³/d and located at the Sergipe hub, the first private Brazilian LNG terminal connected to TAG's network.

The value of the contract takes into account two factors: one fixed, to pay for the FRSU capacity reserve, and one variable, linked to the Japan Korea Marker (JKM), to pay for the gas that will be consumed by the thermoelectric plant. 

Considering assumptions about the value of the JKM, the dollar and, above all, the plant's expected dispatch over the 15 years of the contract, the parties estimated its value at 1.2 billion reais (base date: January, 2023).