Spotlight: Brazil’s upcoming power transmission tenders

The power transmission tenders scheduled to be held this year in Brazil could attract large players and generate significant competition, with discounts similar to those in 2022, according to local experts. 

Luan Alvez, analyst at VG Research, believes traditional transmission firms like ISA CTEEP, Taesa, Neoenergia, Equatorial, Alupar, EDP and CPFL will compete. 

“We don't expect to see any contractors or private equity funds at this time. The industry is expected to be a little more return conscious because of the high capital costs scenario,” he told BNamericas. 

Jovanio Silva, head of strategic affairs at Thymos Energia, said Eletrobras, Energisa and State Grid, as well as contractors such as Cymi, Cobra and Zopone, could also participate.  

He said the hike in global prices of commodities like steel and copper, key to transmission projects, has driven down discounts compared with pre-pandemic and/or pre-Ukraine war years. 

Besides, the upcoming tenders will involve remote areas with logistics and environmental challenges, which are embedded in the commercial proposals. 

According to electric power watchdog Aneel, the average discounts registered in the two tenders in 2022 were 46% and 38%, a sharp decline from 2019 (60%) and 2020 (55%).

The government is projecting total investments of 50bn reais (US$9.5bn) for this year’s transmission line construction tenders.

The auctions are mostly designed to transport the growing renewable energy generation capacity in the northeast to the southeast, which is the main consumption hub. 

The first auction is scheduled for June 30. It involves investments of 16bn reais (US$3.16bn), the highest amount ever for such a bidding process. 

Nine lots consisting of 33 projects will be up for grabs for the construction and maintenance of 6,120km of lines and 400 megavolt-ampere (MVA) in substation transformation capacity.

The projects involve completion periods of 36 to 66 months, and will be located in the states of Bahia, Espírito Santo, Minas Gerais, Pernambuco, Rio de Janeiro, São Paulo and Sergipe.

Two additional tenders, whose details are yet to be announced by the government, are planned to be carried out in the second half. 

NEOENERGIA

On Tuesday, Neoenergia signed a 1.2bn-real agreement with GIC, a global institutional investor, for the sale of a 50% equity stake in eight transmission assets that are in operation. 

The projects – Jalapão, Santa Luzia, Dourados, Atibaia, Biguaçu, Sobral, Narandiba and Rio Formoso – total 1,865km of lines. 

GIC will also have the right of first offer in relation to the potential future sale of a 50% stake in the transmission assets under construction by Neoenergia – Itabapoana, Guanabara, Vale do Itajaí, Lagoa dos Patos, Morro do Chapéu, Estreito, Alto do Parnaíba and Paraíso – which cover 6,090km. The same right will apply to Potiguar Sul, totaling 6,280km.

In addition, Neoenergia and GIC have signed a development agreement for joint participation in the next transmission auctions in Brazil, including the one scheduled for June.

VG Research’s Alvez said the sale was positive for Neoenergia, since the transaction was above VG's estimated equity value for the assets and will help reduce the leverage of the company.

“With a lower leverage, Neoenergia regains firepower for the auctions that will take place this year,” he said. 

Silva highlighted that Neoenergia's move may also be aimed at raising more funds to invest in other sectors in which the company operates, such as generation and commercialization. 

“GIC is a very important fund from Singapore, so this is a very positive strategy,” he said.