How Shell's Prime Energy plans to expand in Brazil’s free market

In November 2023, the Shell Group completed the acquisition of Prime Energy, one of the country's leading independent energy trading firms in the non-regulated free market. 

The company's focus is to support the migration of consumers from the regulated market and offer energy from distributed generation plants on a subscription basis to those who cannot yet exit the regulated market. 

In this interview with BNamericas, Prime Energy CEO Guilherme Perdigão talks about the firm’s projects and potential synergies with Shell's oil operations in Brazil.

BNamericas: What objectives did Shell pursue in the first few months after acquiring Prime Energy?

Perdigão: This transaction was guided by the purpose of offering clean energy solutions to consumers. We have a very complete platform of solutions for the free market, distributed generation and energy efficiency, with a focus on high-, medium- and low-voltage businesses in Brazil 

It's a business model that we call a 'portfolio company', that is, a company with great autonomy, combining the agility of Prime with the balance sheet of the Shell group and, since May, offering Shell Energy products. 

So, in the first few months, the aim was to preserve Prime's entrepreneurial, competitive and agile culture, while bringing out the value of being part of the Shell group. 

BNamericas: Could you give examples of the company's products?

Perdigão: At Prime, we sell energy to the free market and offer migration services, providing full support to customers who want to migrate [from the regulated to the free market]. 

We provide management services, with specialized advice aimed at reducing energy costs by optimizing lighting, for example. 

In distributed generation, we offer energy on a subscription basis for low-voltage customers who cannot yet migrate to the free market. 

Editor's note: Low-voltage consumers with energy bills of over 1,000 reais (US$185) are eligible to join Prime's subscription service via consortia, which promises a 20% reduction compared to the price charged by distribution concessionaires.

Currently in Brazil, only high-voltage consumers, the so-called group A, can migrate to the free market. 

BNamericas: In May, Prime announced that it will be the manager of a new plant in Goiás state. Can you tell us about that?

Perdigão: The companies that build these distributed generation projects don't always have the necessary capacity and capillarity to market the credits and form consortia [to consume the plant's energy]. This requires a few hundred consumer units. So, we contract these plants and become responsible for forming the consortia, selling and marketing credits to consumers. 

Today, we have four plants in operation: one in Rio Grande do Sul, one in São Paulo and two in Paraná. 

We have three more in Paraná and one in São Paulo that will start generating in July, as well as this recently announced plant in Goiás, whose startup is scheduled for the same month. 

Together, these projects amount to 28MW. Our total portfolio of projects totals around 130MW. 

BNamericas: Does Prime invest in the plants in some cases? 

Perdigão: We come in as managers to make the product and its marketing viable. So, today we don't invest in generation, but we’re evaluating the possibility. 

BNamericas: How are you preparing for the opening of the market to smaller consumers? 

Perdigão: By offering a solution for low-voltage customers who cannot yet migrate to the free market. Today, Prime serves 40,000 consumers, mostly through its distributed generation service. This requires a specialized team, an automated system to serve a much larger number of consumers, as well as a marketing strategy. 

When the opening comes, we’ll have a platform ready to engage the consumer. 

BNamericas: How do you view the energy price scenario in Brazil?

Perdigão: This year's rainy period was bad, so the market was volatile again, and the outlook for floor prices doesn't look sustainable. But it's difficult to predict hydrology. 

The way to deal with this is to recognize that volatility is part of the foundation of the business in Brazil. By nature, an electricity matrix that has more than 60% of its supply based on hydroelectric generation is volatile. 

Shell has experience in trading all over the world and, since 2017, we’ve had a trading desk in Brazil that's accustomed to and has all the expertise and products to work with this volatility. 

BNamericas: What synergies are expected with Shell Brasil Petróleo? Is it possible to sell clean energy to decarbonize the oil company's operations? 

Perdigão: We're working on it, but there hasn't been a concrete case yet. Shell has several suppliers in the E&P area, and we have a minority investment in Marlim Azul. The marketing arm is here to exploit these synergies. If Shell makes other investment decisions and expands its portfolio, we have the opportunity to market to the Shell group directly. 

BNamericas: Shell is one of the companies that has submitted offshore wind projects to environmental regulator Ibama. Is this a potential avenue for synergy?

Perdigão: In addition to offshore wind, the Shell Group has solar generation projects under development in the country. With Prime as its marketing arm, there could be the possibility of integration with its own generation. But this would be subject to investment decisions at the right time.