Renova Energia’s turning point

The board of Brazil’s electric power watchdog Aneel accepted Renova Energia's appeal against the cancellation of the construction permit for the Alto Sertão III wind power park in Bahia state. 

Aneel’s leadership acknowledged that the project has been resumed, and that Renova is complying with the schedule established under its judicial recovery process (equivalent to chapter 11 bankruptcy), underway since December 2020. 

The company plans to begin operating Alto Sertão III this month. The complex includes 155 generation towers, distributed in 26 projects across the municipalities of Caetité, Igaporã, Pindaí, Licínio de Almeida, Riacho de Santana and Guanambi.

The undertaking is one pillar of Renova’s judicial recovery plan, alongside the sale of assets such as the Serra da Prata hydroelectric complex (Espra) and Brasil PCH. 

Renova’s CEO, Marcelo Milliet, spoke with BNamericas about the group’s recovery and plans, which include solar power, distributed generation and additional divestments.

BNamericas: How has the company progressed since the approval of the judicial recovery plan? 

Milliet: In the three years prior to the recovery request, filed in October 2019, Renova made several attempts to balance its liabilities and seek capital to conclude the works of Alto Sertão III, but none worked.

At that moment, after AES Tietê gave up on acquiring Alto Sertão, we had a lot of debt, including one of about 1bn reais (US$200mn) with [development bank] BNDES, and only 300,000 reais in cash. That was when [the company] hired restructuring consultancy Integra Associados, of which I am part.

The recovery plan was approved in December 2020. Its first pillar is the conclusion of the Alto Sertão III phase A. This is the company's most important asset, and we needed around 430mn reais to conclude it. The estimate is that it will generate annual Ebitda of 250mn reais when completed, which will allow us to settle liabilities and start developing projects again.

Another pillar of the plan was to obtain a loan, which we arranged with Quadra Capital, which would work as an advance for the third pillar, comprising asset sales. We sold the company's two most liquid assets, which were Espra, for 262mn reais [to Vinci Partners], and Brasil PCH, for 1.1bn reais [to the Mubadala group].

With the conclusion of these operations, we will have more than 1.3bn reais invested in the company. With this, we will pay off a debt of 1.1bn reais and still get resources to finish Alto Sertão. 

These sales and the loan were the turning point for the company, which has now been recapitalized to comply with the judicial recovery plan and have the structure in place to pay off debts. 

BNamericas: What are the company’s prospects?

Milliet: First is to complete the park, in the first half of 2022. It will have 430MW of installed power capacity, one of the 10 largest in Latin America. And we hope to have about 170MW of energy already dispatching by December. The future of the company is to conclude and operate this asset, which we intend to retain.

The second pillar will be to continue developing more select projects and maturing projects we have, not only wind but also solar plants. Today, we have around 5GW of potential projects under development, but we will not keep this entire portfolio; we will divest part of it, because it is a very large investment.

And we intend to implement solar parks. We have already identified potential in the Caetité region, where Alto Sertão III is located. This is interesting, as we could set up a hybrid project there, taking advantage of the local substation. There is great synergy, with common operations and maintenance centers. 

BNamericas: What are Renova's main projects under development, besides Alto Sertão?

Milliet: The 5GW I mentioned are wind, and there is still at least another 1-2GW of solar potential in several areas, including Caetité. We have to select and implement them little by little.

All our farms are expected to be connected and make energy flow viable within a reasonable timeframe. Currently, there is a saturation of the wind power market, with suppliers having difficulty delivering turbines, so we are trying to advance some solar projects. We are also in the process of recovering our relationship with suppliers. 

BNamericas: You recently resumed your partnership with GE Renewable Energy to serve Alto Sertão. 

Milliet: GE will supply turbines and provide associated services. It is of utmost importance to have the manufacturer on our side. We were also able to bring back ABB, which is the supplier of substation equipment. It resumed the sale of equipment and services to the company, despite the judicial recovery process. All this was the result of a joint effort, with support from the creditors, who believed in the project. 

BNamericas: How much does the company expect to grow and invest?

Milliet: We are still finishing the strategic planning, since it was necessary to confirm that the restructuring strategy adopted would be implemented. Renova needed to comply with its commitments before anything else. 

BNamericas: Will the company focus on the free or regulated market, or both?

Milliet: Both free and regulated. We could have clients becoming partners of the new parks and, thus, self-producers of energy. There are large companies looking for this model nowadays. As for Alto Sertão, its energy was 100% sold, partly at Aneel’s energy auctions, and partly via PPAs to Cemig and Light. The energy is already sold up to 2035. 

BNamericas: Which impacts will the expansion of the free energy market have?

Milliet: I think everything is a matter of balance. We can have new projects in the same line as we had in Alto Sertão, with part of the energy sold in the regulated market and part in the free market. I think it is a question of project security. We have no preconception to follow a single path. The two markets should survive, even for the sake of project security. 

BNamericas: Is distributed generation on the company's radar?

Milliet: We have a small solar project that was stopped in Caetité, a 4.2MW plant. [But now] it is very close to going into operation, and with it we will probably get into distributed generation. We are looking at the opportunities on the table. 

BNamericas: Do you see potential in offshore wind and hydrogen plants? 

Milliet: The market will be a mix of all of these. There will be wind with hydrogen, linked plants. It makes perfect sense to invest in green hydrogen, looking for plants close to the raw materials they need.