Spotlight: Brazil's electric power capex

Brazil’s electric power sector will attract multibillion dollar investments in 2023, analysts told BNamericas. 

Capex will be earmarked for power generation, especially renewable energy projects, in addition to transmission and distribution. 

Luan Alvez, chief analyst at VG Research, highlighted the investment plans of four companies. 

ELETROBRAS

Eletrobras intends to invest about 9bn reais (US$1.75bn) this year, of which 4.7bn reais are earmarked for generation, 3.8bn reais for transmission and 500mn for specific purpose entities (SPEs). 

Of the total, about 4.2bn reais will be directed to maintenance at its subsidiaries Furnas, Chesf, Eletrosul and Eletronorte, the Angra III nuclear project, Amazonas GT, CGTEE and the Santo Antônio hydro plant. 

Alvez does not expect any significant acquisitions in the short term by Eletrobras, which was privatized last year. 

“What the company will do in the first years of privatization is an operational and financial turnaround process, as occurred with Cesp/Auren from 2018 to 2022, which should bring a strong dividend payout cycle. After the turnaround, the company will be more active in M&A,” he told BNamericas.

CPFL

CPFL Energia plans to invest about 5bn reais in 2023, of which 3.9bn reais will be for distribution, 640mn reais for transmission and 520mn for generation. 

CPFL Paulista, which is responsible for power distribution in São Paulo city, will receive 1.6bn reais.

CPFL Piratininga and Santa Cruz (distribution in the interior of São Paulo state) will receive a total of 750mn, while RGE Sul (distribution in Rio Grande do Sul state) will get 1.6bn reais.

Generation projects focused on renewables will receive 520mn reais, and the transmission segment 620mn reais, a significant part of which will go to the power transmission company of Rio Grande do Sul (CEEE-T), acquired by CPFL in 2021.

ENGIE

Engie plans to invest approximately 4.0bn reais in 2023, prioritizing the power generation (with a focus on renewables), power transmission and gas markets. 

VG Research expects that 1.7bn reais will be invested in the Santo Agostinho wind complex in Rio Grande do Norte, and 150mn reais in the Novo Estado transmission project in Pará and Tocantins. 

Other Engie 2023 highlights include the Serra do Assuruá wind farm in Bahia, the Assú PV solar power project in Rio Grande do Norte, the Alvorada solar project and the Umburanas and Campo Largo wind farms in Bahia. 

Additionally, 200mn reais are likely to be invested in gas transportation through Engie's subsidiary Transportadora Associada de Gás (TAG). 

NEOENERGIA

Meanwhile, Neoenergia is expected to invest about 10bn reais this year, with 4bn reais going to its Coelba, Cosern, Celpe, Elektro and Neoenergia Brasília power distributors, 3bn reais for power transmission and 3bn reais for renewable generation projects. 

Aline Penteado, manager of structured business at BMG Seguros, said some 70bn reais a year are expected to be invested in Brazil in the electric power sector in the next decade, according to projections by federal energy research company EPE. 

The two power transmission tenders scheduled to be held by watchdog Aneel alone are likely to attract more than 15bn reais. 

In recent auctions, bidders have presented discounts of more than 50%.

“What we observe is that they enter aggressively both in the discount and in the delivery of the projects, anticipating their delivery and, thus, their anticipated revenue [RAP]. Even so, they are works of excellent quality, within the technical specifications,” Penteado told BNamericas.  

Among the main players in the transmission segment are multinational firms such as Engie, ISA-CTEEP, EDP and State Grid.

One of Brazil’s largest transmission projects is the Tucuruí line, which is designed to connect far north Roraima state to the national grid. 

Last year, the federal government signed a legal agreement to settle indigenous-related issues to comply with the conditions set out in the transmission line’s construction plan, but the project’s outlook remains cloudy. 

“Because it involves indigenous lands, it may be that new studies will be requested or analyzed differently, considering the change of government,” Penteado said. 

New President Luiz Inácio Lula da Silva has promised to reposition Brazil as a global environmental player, respectful of native populations, and created a federal ministry focused on indigenous issues, in contrast to his predecessor Jair Bolsonaro. 

Other investments will be attracted via Aneel’s power generation auctions, for both backup capacity and new and existing energy. 

Among the main players in the segment highlighted by Penteado are Cemig, Enel, Eletrosul, EDP, Energisa and Equatorial Energia.