China’s Shemar confident in Latin American market growth

As a supplier of composite insulators for transmission lines and substations, China's Shemar is confident of gaining a greater share of the Latin American power transmission market.

The private company is investing US$80mn in a project in Brazil that will serve as a showroom for its products, including insulation solutions for lines and substations based on composite materials, replacing glass and porcelain. 

Shemar promises to reduce capex and practically eliminate opex of the projects.

BNamericas spoke to José Tamayo, the company's CEO for Spain, Portugal and Latin America, about the business prospects.

BNamericas: How do you assess the business prospects in the energy transmission area? 

Tamayo: There’s a huge growth in transmission lines around the world to connect renewable sources to grids. 

Our core business is the research and development of materials. With our technologies, we’ve managed to reduce project capex between 3% and 6% and opex by 100% [because projects won’t require maintenance].  

We see enormous growth potential in Brazil. There are two giant auctions ahead [the second of 2023 in December and the first of 2024 in June], and we aim to reach 100% of the market. 

We’re investing US$80mn to operate and maintain a lot we won in an auction held by Aneel in 2021. 

It's a showroom project that we'll show to potential clients in Latin America, as it has all our solutions. It's a 100% maintenance-free project, which ultimately allows people to reduce their energy costs. 

[Editor's note: The lot includes construction and operation for 30 years of two transmission lines and three substations in Cachoeiras de Macacu, Itaboraí, Tanguá and São Gonçalo in Rio de Janeiro state.]

BNamericas: Is the investment equity?

Tamayo: About a third of the total is equity, and the rest is financed by the China Development Bank. 

BNamericas: Do you see growth potential in Latin America beyond Brazil?

Tamayo: Definitely. We expect to achieve market shares of 60% to 70% over the next few years in insulators for substations and transmission lines.

BNamericas: Do you intend to participate in the next Aneel auctions and in other Latin American countries as builders/operators of lines and substations?

Tamayo: Outside Latin America, we intend to participate in auctions as builders and operators. The concession in Brazil is intended to be a showroom. 

We have projects [involving the supply of insulators for transmission lines and substations] in Chile, Colombia and Peru.

BNamericas: Do you plan to build a factory in Brazil or have a service center in the country?

Tamayo: We already have a service center in Brazil, which is essential for the development of projects locally and in Latin America. 

Our factory in Nantong, China, has the capacity to meet 70% of global demand. With the new plant being built in the US, we’ll be able to meet 100% of global demand. 

There’s a significant shortage of insulating glass produced in Ukraine.

BNamericas: And have you been gaining market share because of this shortage?

Tamayo: We’ve been gaining market share not because of the lack of glass, but because of the quality and advantages of our product. 

Traditional business problems usually occur due to damage caused by wind, pollution, rain and ice. 

It’s estimated that the annual cost of external insulation problems on the global network is in the region of US$40bn, which includes fines and lost profits due to the disconnection of the line. And this figure is growing by around 10% a year, as structures are getting older. 

This cost can be reduced to practically zero. And the efficiency of the system can be increased by 30%. 

In 1999, practically all substation projects had porcelain insulation. By 2022, 30% were made of composite materials, and by 2025, we estimate that 80% of projects will be made of composites.

BNamericas: What are the figures for Brazil?

Tamayo: Around 10% of new substations are insulated with composite material. 

BNamericas: What about lines?

Tamayo: We secured contracts for around 80% of the lines contracted in Aneel's first 2022 auction, totaling 3,790km. We signed contracts directly with the concessionaires. 

Since we entered the South American market, we’ve increased our market share to more than 80% in the region.