Auren Energia CEO: 'The free market will grow, and we have to prepare for it'

Auren Energia concluded Monday the corporate reorganization process of the energy assets of Votorantim and Canada Pension Plan (CPP) Investments and started trading its shares on the São Paulo stock exchange (B3). 

The new company, which incorporated the shares of Companhia Energética de São Paulo (CESP), has a 100% renewable energy matrix and a robust pipeline of projects that combine hydro, wind and solar sources, as well as hybrid solutions.

Auren will also be one of the largest energy traders in the country, serving more than 500 customers.  

CEO Fabio Zanfelice tells BNamericas in this interview that the focus is to continue investing in renewable energy, including hydroelectric plants, with the transmission business also on the radar.

BNamericas: How and why was Auren Energia created?

Zanfelice: Votorantim Energia was created in 1997, managing power from energy self-production assets to meet the business of Votorantim, which operates in the mining area.

In 2005, it started a strategy to grow in the energy market. In 2016, we entered a wind farm [project] in the northeast and in 2017 closed a partnership with CPP.

Subsequently, we acquired CESP through a public auction. We then had three structures: Votorantim Energia, a very active trader, CESP with its own structure, and VTRM [combining Votorantim group and CPP,including CESP energy assets].

Therefore, it would make perfect sense to join the structures due to cost and competence synergies. VTRM has the wind farms, and CESP has the hydroelectric plants; we have the possibility to mitigate CESP's hydrological risk, and CESP has the capacity to reduce the risk of wind intermittency. 

There is an agenda to modernize the electricity sector. The free [non-regulated] market is going to grow, and we have to prepare for it with robust generation capacity and one of the largest trading companies in the country. 

BNamericas: What are the growth and investment goals?

Zanfelice: Today we have the financial and technical capacity to make acquisitions in the Brazilian market, besides growing organically through greenfield projects. The focus is to continue investing in renewable energies through acquisitions or partnerships. 

BNamericas: Do you mean wind and solar, and hydro power?

Zanfelice: Yes, not only wind and solar but also hydroelectric, because that's what we know and like to do. Including SHPs [small hydros]. A cluster of SHPs in the same region or watershed makes a lot of sense and can be an opportunity, because there are scale gains in operation. 

BNamericas: What are your main assets?

Zanfelice: Porto Primavera is our largest hydroelectric plant, but we have minority stakes in other hydroelectric plants via Votorantim, such as Barra Grande, Campos Novos and Machadinho. And we have wind assets totaling 1GW, of which 600MW are operating, within a 40km radius in Piauí. 

We're now finishing the construction of the Ventos do Piauí II and III wind farms, with another 409MW, while we’re developing the Sol do Piauí hybrid project. It’s a solar undertaking that will be installed on the [206MW] Ventos do Piauí I site, in the hybrid model.

It’s the first commercial scale hybrid project in Brazil. The hybrid model is very important to us, and we have worked hard for this model to be regulated in Brazil. There are, in this region, wind turbines that generate energy predominantly at night. And, during the day, the connection and transmission system is idle. So, with the solar plant, we optimize the generation.

We’ll continue to develop this modality in other wind farms. We have a pipeline of almost 2GW of wind, solar and hybrid plants to be installed.

BNamericas: Is power transmission of interest to the company? 

Zanfelice: We also looked at this segment in the past and we’ll continue to evaluate it, since there is potential synergy with the company's strategy.

But the risk/return ratio will be a metric to make the investment, and it’s not our orientation to enter Aneel's auctions to start building from scratch. There are already large transmission companies that would be more competitive than us. So we look at opportunities of assets already in operation.

BNamericas: What about offshore wind, hydrogen, batteries?

Zanfelice: I particularly think that Brazil has many opportunities onshore, which makes these projects more competitive. 

About hydrogen, we’ll observe the market. As the technology becomes more mature, we can evaluate entering the business. It’s not in our interest to enter at an early stage. 

As for storage, Brazil has the hydroelectric reservoirs that are able to regulate the system, even with a greater addition of renewable energy in the matrix, which means that battery storage is not moving forward as much here as in other places in the world. But as the technology consolidates, it will be part of the business of any company. 

BNamericas: Do you plan to participate in Aneel generation auctions this year?

Zanfelice: Most of our wind power is sold in regulated auctions. We like this model, as long as the project becomes competitive. But the last auctions had low demand, with great competition [i.e. strong discounts]. Once the regulated market makes sense again, we’ll also look at this opportunity. 

BNamericas: Is the company studying projects with dollar-indexed power purchase agreements (PPAs)? 

Zanfelice: It’s a modality that makes sense, especially for PV solar projects, so it’s a natural hedge. We have no contract to be signed, but it makes sense for greenfield projects. It’s an opportunity, and we will explore it when we have the possibility.