Brazil’s power transmission tender attracts US$620mn in capex

Brazil's second power transmission auction of the year ended with all three lots being awarded, resulting in a total investment of around 3.35 billion reais (US$620 million).

The average discount rate was 48.9% in relation to the maximum initial annual allowed revenues (RAPs) established by electric power watchdog Aneel for the tender. Such a high rate was not expected by experts who talked to BNamericas and cited the sector’s regulatory stability as a key factor.  

The consortium and the winning companies will be responsible for the construction and maintenance of 783km of transmission lines and 1,000MVA of transformation capacity, as well as continuing to provide public service for 163km of transmission lines and 300MVA of transformation capacity.

The lots cover the states of Bahia, Espírito Santo, Minas Gerais, Paraná, São Paulo and Santa Catarina. The projects awarded will be completed in 42 to 60 months.

Consortium Engie Brasil Transmissão won lot 1, offering a discount of 48.1%. The lot covers Santa Catarina, Paraná, Minas Gerais, São Paulo and Espírito states, calling for 2.9bn reais in investments. 

Transmissora Aliança de Energia Elétrica (Taesa) took lot 3 with a 53.5% discount. The lot, which involves undertakings in São Paulo, foresees a 244mn-real capex. 

And Cox Brasil won lot 4 with a discount of 55.6%. Located in Bahia, this lot has a 168mn-real investment forecast. 

Franceli Jodas, a partner at KPMG, was surprised by the “aggressive” discounts presented, considering the current macroeconomic factors, interest rates and inflation. 

“We believe that regulatory stability, especially in the transmission sector, previous experience and the financial strength of the bidders were largely responsible for the competitiveness we saw” on Friday, she told BNamericas. 

Jodas added that the auction was extremely beneficial for the transmission system. “We're talking about experienced agents with the financial and operational capacity to implement the lots they won.”  

Ângelo Belitardo, an analyst at investment manager Hike CapitalHike Capital, was also surprised by the high discount in the auction, especially for lot 3 won by Taesa. “This indicates an environment of high competition among the players, who are willing to reduce margins to ensure a strategic presence in transmission projects,” he told BNamericas. 

Competition in the next transmission auctions is expected to remain high. “The search for transmission assets in Brazil remains attractive due to the scenario of economic expansion and growing demand for energy, and the regulatory stability offered by Aneel,” Belitardo added. 

RIO GRANDE DO SUL WITHDRAWN 

Four lots were initially planned to be offered, but one had to be excluded during the process of approving the tender’s public notice. 

The mines and energy ministry (MME) determined that the lot with projects in Rio Grande do Sul should be withdrawn to conduct a new study of the layout of the transmission lines and the location of the substations initially planned. The study will be produced by federal energy research company EPE.

The justification is that the sites where the projects would be installed, especially the São Sebastião do Caí 2 substation and the 230kV Caxias-São Sebastião do Caí 2 and 230kV Ivoti 2-São Sebastião do Caí 2 transmission lines, were severely affected by the floods in Rio Grande do Sul in April.