Siemens Energy, Eletrobras sign R$300m deal

Plan is to update, renew transmission assets in different parts of Brazil

09/04/2024

Equipment manufacturer Siemens Energy signed four contracts with Eletrobras amounting to over R$300 million for updating transmission assets in several Brazilian states. The plan is to renew depreciated assets or those that have reached the end of their useful life.

Siemens Energy’s vice president for Latin America, André Clark, said the Brazilian system is reliable but has been operating for several decades and needs some repair and improvement. Furthermore, with climate events such as drought and heavy rains, combined with the expansion of intermittent renewable energy sources (wind and solar) in Brazil’s power mix, it is necessary to make an effort towards the grid’s resilience.

“The system was designed when there was only one type of supply and demand, stably, in a one-dimensional electrical system, without the extreme weather events we are currently experiencing,” he said. “We are facing new system operation barriers, a more adverse environment with further climate change, and changes in the demand and supply profile.”

In August, Brazil faced three blackouts in ten days. In one of the events, a kite caused the blackout, which raised fears among experts about the grid’s vulnerability. Mr. Clark emphasizes that the system is reliable but recognizes that adjustments to the current reality are required.

The investment is part of a project to improve transmission services, required by the Brazilian Electricity Regulatory Agency (ANEEL) to meet the conditions of regularity, continuity, efficiency, and safety. The agreements include clauses requiring transmission companies to carry out works to replace assets at the end of their useful life. Consumers pay for the improvements, as the amount is returned to the company through an increase in Allowed Annual Revenues (RAP).

The energy transmission segment has been increasing revenues for manufacturers in Brazil, not only with the update of structures but also with the construction of new projects following auctions. Under Siemens Energy’s total revenue in Brazil, the area of grid technologies accounts for 61%. In fiscal year 2023, this share was 45%.

According to Eletrobras’s vice president of engineering, Robson Campos, deliveries will start in 2024 and continue until the end of 2026. “Brazilian regulations encourage this type of investment and all major transmission companies invest heavily. Eletrobras has a planned investment of R$3.3 billion in improvements for 2024. These contracts with Siemens Energy represent less than 10% of what we will invest.”

Among the projects, is the update of the Grajaú substation, responsible for almost 40% of the energy supply in the city of Rio de Janeiro. In the Northeast region, the German company will supply new fixed series capacitor (FSC) banks for the Imperatriz line, in Maranhão, to ensure stability to the power system and increase transmission capacity.

In the states of Maranhão, Pará, Mato Grosso, and Rondônia, the manufacturer will install new circuit breakers to protect high-voltage assets. In the area of the Madeira River, known as “Linhão do Madeira,” Siemens Energy will provide an online monitoring system for gases dissolved in insulating oil for transformer stations.

*Por Robson Rodrigues — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Brazil’s first forest concession moves forward with consultation phase

Government intends to restore 15,000 hectares in Bom Futuro National Forest in Rondônia state

09/04/2024

The government expects to complete Brazil’s first public concession for forest restoration by the end of this year. This is also the first project to restore degraded lands financed through carbon credits, which could be an important test for the functioning of this mechanism. The goal is to restore 15,000 hectares in the Bom Futuro National Forest in Porto Velho, Rondônia.

Still in public consultation, the bid has attracted interest from private-sector companies and was well-received by the Indigenous community neighboring the territory. However, it still raises questions regarding oversight, land regularization, financing, and security.

As planned, the Bom Futuro National Forest (Flona) will be subdivided into blocks and handed over to the administration of companies. They will need to restore the land by bringing the vegetation as close as possible to the region’s original vegetation, said Renato Rosenberg, director of Concessions of the Brazilian Forest Service, an agency linked to the Ministry of the Environment and Climate Change.

The restoration of each degraded hectare in that forest is expected to require around R$20,000 for irrigation, soil recovery, and seedling planting. As a result, restoring the area would cost around R$300 million. Companies will be able to capture the carbon credits related to the new trees that will be planted and a portion of this revenue will go to the Brazilian state in the form of a concession fee.

Mr. Rosenberg said revenue is not the focus, though. “The government’s primary objective is not revenue generation and that’s why we are minimizing the concession fee.” Under the model being designed in partnership with the Brazilian Development Bank (BNDES), the proposal that offers the highest percentage of revenue—with a cap close to 15%—and a fixed payment at the time of contract signing wins. The financial equation, however, may vary according to non-mandatory actions that the project wants to encourage. “Investments in research and purchasing seedlings and seeds from Indigenous communities could be some of these actions. It’s not mandatory, but if they do it, they get a bonus,” he said.

Neighboring the Bom Futuro Flona, the Karitiana Indigenous community views the project’s arrival with optimism, both in economic terms and for the security of the demarcated territory, which occupies about 800 hectares. “We need to restore reforestation. We are suffering a lot from invasions by miners and loggers, and I think they [the concessionaires] can help monitor our region as well,” said Edilene Karitiana, one of the group’s leaders.

However, the format of the security scheme for the territory to be granted, which has a history of invasions and actions by land grabbers and organized crime, has not yet been defined. Without police power, concessionaire companies will need relevant support from the State to operate with some security in the area.

From the government’s perspective, part of the risk “is inherent to the business risk itself and is the same as in the case of a project in a private area,” said Mr. Rosenberg. “On the other hand, only the public power has police power. Therefore, part of this risk will be allocated to the granting authority,” he added, noting that the limits of each actor’s role will be discussed in the public hearings scheduled for this month.

The Karitiana people also see opportunities for selling seedlings. The supply of seedlings for restoration projects is one of the possible bottlenecks for the government’s goal of restoring 12 million hectares, as revealed to Valor in July last year by the president of the Brazilian Forest Service, Garo Batmanian. At the time, he estimated a demand of about 5 billion seedlings of various species. Production at that time was around 150 million seedlings per year.

In the case of concessions, according to Mr. Rosenberg, this risk is private and with little chance of problems. “They [concessionaires] will have a very comfortable maximum schedule to carry out the restoration. During this period, they will have time to organize the nurseries, whether vertical or horizontal,” he said.

One organization interested in participating in the bidding, re.green!, emphasizes that it already adopts partnerships with local communities in other projects, especially seed collection courses, an essential activity in seedling production. The company’s director of institutional relations, Mariana Barbosa, says that the Bom Futuro Flona could be a milestone for forest restoration in the country but notes that there are still questions to be answered.

“It’s a unique and innovative model. We see it as a positive agenda and have been studying the bids over the past few months. The current stage is precisely this: understanding how it will work, moving from a place of looking at opportunities to now seeing the project taking shape,” Ms. Barbosa said.

Mr. Rosenberg came out optimistic from the initial surveys with potential interested parties. Biomas, a company created in 2022 by Itaú Unibanco, Santander, Rabobank, Vale, Suzano, and Marfrig to operate in reforestation and conservation, is also interested in participating.

Natalia Renteria, director of Regulatory Affairs at Biomas, believes that the concession proposal “makes perfect sense” for the company. She reiterates that the success of a concession of this type can be a milestone for scaling restoration projects. “For a sector that is still in its infancy, it is very important. To scale in line with the country’s climate commitments, an economic model that stands on its own is necessary. And concessions fit into this. We are evaluating this opportunity and view the opening of this process very positively.”

The bid schedule includes a public consultation with Indigenous peoples confirmed for next Monday (9) at the central village of the Karitiana Indigenous Land in Porto Velho. On the 10th, the advisory council of the Bom Futuro Flona will meet, and the public hearing will take place the following day.

After these events, there will be a two-week period for clarifying doubts before forwarding the final version of the bid to the Federal Court of Accounts (TCU). The public spending watchdog has 75 days to analyze the material.

*Por Murillo Camarotto — Brasília

Source: Valor Inaternational

https://valorinternational.globo.com/
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Vibra prioritizes Petrobras brand renewal amidst growth strategy

CEO Ernesto Pousada outlines plans for expanding international presence and exploring new market opportunities

09/02/2024

Ernesto Pousada — Foto: Leo Pinheiro/Valor

Ernesto Pousada — Foto: Leo Pinheiro/Valor

Vibra CEO Ernesto Pousada said the company’s top priority is renewing the Petrobras brand across its network of fuel stations. According to him, internal research indicates that consumers identify strongly with the BR brand, particularly in segments like convenience stores (BR Mania) and oil change services (Lubrax).

However, the outcome depends on ongoing discussions with the state-owned oil company. If Vibra is unable to renew the contract for the use of the BR brand across its more than 8,000 stations, the alternative plan is to develop the Vibra brand, a move that other companies have already tested, Mr. Pousada noted. “Both parties need to advance the discussions in the coming years. Vibra is keen on renewing, but under certain conditions,” Mr. Pousada said during Vibra Investor Day on Thursday (29th).

The contract for the use of the BR brand by Vibra is set for 10 years and will expire in 2029. Petrobras has not commented on the matter.

Mr. Pousada also said that part of Vibra’s growth strategy involves increasing lubricant sales to international markets, particularly in Latin America, where the company currently has a minimal presence. The company’s market position in this sector is still very small, leaving room for growth until it becomes the regional leader, the CEO mentioned during the event.

The initial phase of international expansion will focus on the southern part of South America, in the six countries where the company already operates, said Vanessa Gordilho, Vibra’s executive in charge of business, products, and marketing. “It won’t be starting from scratch and doesn’t require much effort,” said Ms. Gordilho.

According to Mr. Pousada, the past four quarters have been dedicated to “getting the house in order.” Additionally, the CEO said that the company will continue preparing its internal processes and management for a new growth cycle, which he expects to occur in the coming years.

Another avenue for expansion is through Comerc, whose acquisition of the remaining 50% stake was announced last week. The company plans to implement a strategy to capitalize on R$1.4 billion in synergies, which includes refinancing Comerc’s debt—currently more expensive than Vibra’s average debt cost—among other initiatives, said Clarissa Saddock, Vibra’s chief renewable energy and ESG officer.

Vibra also sees opportunities in its recently formed partnership with Itaú for energy commercialization, especially given the prospects for the complete opening of the market in the coming years, and in pending projects related to micro and mini-distributed generation and energy efficiency.

Regarding natural gas, Mr. Pousada mentioned that the company does not yet have a significant presence and is seeking the “right angles” to gain access to the molecule and advance in this segment, aiming to complement its product portfolio for clients. However, the executive said that the company does not have a strong desire to enter the natural gas market, and any moves in this area will be approached with capital discipline. Mr. Pousada also projected a 15% growth in the liquid fuels market by 2030.

*Por Fábio Couto — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/

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Companies return to foreign debt market in September

With expected interest rates cut in the U.S., Brazilian companies should resume bond issuance

09/02/2024

Investment banks are preparing their first meetings with foreign investors to launch Brazilian companies’ issuances in the international debt market. Around six deals are expected for September, according to sources interviewed by Valor, including issuances by Raízen and banks. Subsea engineering company Oceânica, which is new to this type of transaction and tried to launch an offer in August, is also among possible candidates.

The market expects a busy season, starting Monday (2) after the return of vacations in the Northern Hemisphere and the Labor Day holiday in the U.S. In this scenario, some issuances may be brought forward not only to take advantage of more attractive rates but also to avoid proximity to the elections in the U.S., which could increase volatility.

The year has already surpassed 2023 in the amount raised with offers abroad. Brazilian companies issued $16.4 billion in bonds so far this year, compared to $16.1 billion last year, according to data from Bond Radar. People familiar with the matter say the expectation is that transactions will reach around $20 billion at the year-end.

The banks coordinating the operations have different readings of the impact of the election in the United States on the deals. Samy Podlubny, head of debt capital markets at UBS BB, says potential issuers are currently divided into two groups: those betting on September and those looking at January 2025 to avoid an issuance during the race for the White House. “Although they know this month’s window could be complicated, given the concentration of deals in a shorter time, several companies accelerated to issue before the [U.S.] elections,” he said.

Gustavo Siqueira, Morgan Stanley’s country head of fixed-income capital markets, says companies should try the September window. However, he does not expect an impact from the U.S. elections on the markets. “We see a more active month but some deals could be delayed to October or November,” he pointed out. According to the executive, the market is liquid and investors are seeking return, which opens up room for issuing companies. “We see a recovery after two weak years.”

From the beginning of August—when a steep drop in the stock market in Japan shook global markets—until now, the conditions for raising funds through bonds abroad have improved, according to Caio de Luca de Simões, head of debt capital markets at Bank of America in Brazil. “Treasuries became more stable and net interest rate spread returned to an appropriate level, after a period of strong volatility,” he said. “We are seeing one of the best cost scenarios for fundraising in the last two years.”

Pedro Frade, in charge of foreign debt at Itaú BBA, says rates contracted in the last month, both in Treasuries and Brazil risk. However, according to him, attention is focused not only on the next Fed meeting but also on the numbers about inflation and unemployment in the U.S., which could change the market’s mood and shrink the window for issuances. “Frequent issuers benefit from shorter windows,” the BBA executive points out, explaining that these deals are typically completed very quickly, making it possible to avoid market volatility.

He estimates a concentration of deals in the first half of the month. Given these uncertainties, the number of issuers that will be able to tap into the window is unknown. “Many companies will do their math to determine if the foreign market is the right path for them,” Mr. Frade says.

One of the points to be monitored by issuers in the next window is the high level of competition with other deals by companies from the same region. According to UBS BB projections, the number of offers from companies in Latin America could reach 15 in September. From Argentine companies alone, three deals are expected.

“Investors select not only [a deal] in Brazil but in Latin America as a whole, as the budget is usually the same,” Mr. Podlubny points out. “It doesn’t mean investors are short of funds but perhaps they don’t have time to dive deep into all deals and may choose to prioritize just a few. That could have an effect, for example, on the size of books.”

Miguel Diaz, debt market specialist at Santander Brasil, says the scenario is favorable given the current rates in the U.S. market, which have caught the attention of issuers. He expects up to eight issues between September and early October.

Matheus Licarião, head of debt capital markets at Santander Brazil, says investors’ agenda is very positive after Labor Day. He is working with two possible scenarios for the month. In the first scenario, as companies understand that the market has already priced the start of a reduction in interest rates, they choose to launch deals early this month—taking some distance from the U.S. elections. On the other hand, companies could choose to wait for the Fed’s monetary policy decision on September 18.

If optimism increases after that date, the space could be open to both frequent and new issuers, the executive says. “It’s a good timing for companies [to access the market]. The question is whether it will be a good or a very good window,” he points out.

When contacted, Raízen said it is always attentive to opportunities in the capital market, thanks to its “strategic positioning, quality of management, financial innovation,” and investment grade by three rating agencies. “It’s natural that the financial community keeps us on their radar and sees us as a candidate.” Oceânica did not respond to a request for comment.

*Por Fernanda Guimarães, Rita Azevedo — São Paulo

Source: Valor Inaternational

https://valorinternational.globo.com/
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Starlink says it will not comply with Brazil’s Supreme Court decision

Satellite broadband company dominates Brazilian market and has already requested telecoms telegulator ANATEL to expand network in the country

09/02/2024

Starlink informed Brazil’s telecoms regulator ANATEL that it will not comply with the decision by Justice Alexandre de Moraes of the Federal Supreme Court to suspend access to Elon Musk’s social media platform X.

The information was passed informally by the company to the agency’s chief, Carlos Baigorri, as revealed by TV Globo.

ANATEL has initiated a procedure on the 30th to notify internet carriers and shut down the platform.

Starlink offers satellite internet services and, like X, is owned by billionaire Elon Musk. With the platform’s non-compliance with court decisions, Justice Moraes ordered the company’s accounts to be blocked so that the imposed fines could be paid.

According to the president of ANATEL, the company is conditioning the cut-off of access to X on the suspension of the blockade of its accounts. He also stated that the maximum sanction for a telecommunications company, in case of non-compliance with decisions, is the revocation of the license, which would prevent Starlink from operating in Brazil.

Justice Moraes ordered the shutdown of X on Friday. The measure was adopted after the platform began to disregard court decisions and refused to appoint a new legal representative in Brazil.

In May, Starlink reached 42.5% of the market, overtaking Hughesnet, which held 38.1%, according to ANATEL. In June, Starlink had 215,500 customers, mainly in the Amazon region.

*Por Isadora Peron — Brasília

Source: Valor International

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