'The market in Latin America, especially in Brazil, is bigger than we imagined'

Voith Hydro, a German company specializing in hydropower solutions, is forecasting strong demand for plant modernization services in Brazil. 

A study carried out by the company projects that this market will attract investments of around 1.3bn euros (US$1.4bn) per year in 2024 and 2025. 

In this interview with BNamericas, the managing director of Voith Hydro Latin America, Hans Poll, speaks about the company’s projects and the business outlook.

BNamericas: What is the scenario for modernization/improvement services for hydroelectric plants in Brazil?

Poll: After my return from Canada, where I worked for seven years, one thing that made me very optimistic is that the market in Latin America, especially in Brazil, is apparently bigger than we imagined. 

We did a study of this market, and there’s a prospect that, over the next two years, investment of around 1.3bn euros [US$1.4bn] per year will be required in the modernization of hydroelectric plants in Latin America, at least 90% of which will be in Brazil. That's not counting the construction of new plants.

BNamericas: How many plants are likely to require these services in the coming years?

Poll: In terms of modernization alone, there would be around 15 hydroelectric plants all over the country, from north to south. These are large plants, most with reservoirs. I'm not including SHPs [small hydroelectric plants].  

These are plants that, 30, 40 years after they start operating, will certainly require some kind of modernization service.

BNamericas: What do these services generally involve?

Poll: After 30 years there is a need to change the active part, the winding of the generators. 

An unavailable turbine can result in an unscheduled shutdown and fines for the generator. So maintenance is needed. And during maintenance, improvements can be made, such as increasing the machine's power and improving its efficiency.

There's also the matter of plant automation. The software and hardware need updating. 

In short, I’d say that the services involve replacing parts that have worn out, increasing power and performance and updating the machine's software and hardware.

In a country like Canada, it's actually cheaper to replace a part with a new one than to repair it. And there, planning is done well in advance. 

In Brazil, this is different. The timescale is usually shorter and, in many cases, the parts are refurbished, improved, machined and repainted, for example. New parts are not usually bought. 

But there are often surprises in a refurbishment. A part that was previously not due to be replaced may need to be replaced. Then there’s the risk of not having the machine back in operation on schedule.

So we need to plan further ahead, four years in advance, not a year and a half from the signing of the contract, as is the case. 

Over the last 15 years, we have invested almost 200mn reais [US$40.4mn] in Brazil to set up a fleet of machine tools for state-of-the-art machining, making it possible to modernize at the right time and in the right way.

BNamericas: What projects and contracts is Voith currently involved in?

Poll: We have several modernization projects with Eletrobras, including the Paulo Afonso 2 and 4 power plants and Porto Colombia.

BNamericas: What about the market in other Latin American countries, what are your expectations?

Poll: We’re supplying Kaplan machines to EBY in the Yacyretá complex, between Paraguay and Argentina, and we have a Kaplan machine in Chile for Statkraft. These are the contracts we have for new machines in South America. 

There’s also a plant in Honduras, El Tornillito, for which we’re supplying equipment. But it hasn't come off the drawing board yet.

Where we see the greatest demand outside of Brazil is in North America, specifically in the US and Canada. There’s already a large wave of modernization and this is set to grow, with [US President Joe] Biden's plan [to increase investment in renewable sources]. 

Unfortunately, Brazil not being part of the Trade Agreements Act has put us in an unfavorable position when it comes to exporting equipment to North American clients, even though we’re very competitive.

We hope that in the next few years we’ll once again see an upturn in new power plants in Brazil. 

This is important for stabilizing the national electricity system, because hydroelectric plants are the best machines for the type of system we have in the country. They are more flexible, because they have great inertia in their generators, and they can inject additional load quickly into the system.