Acciona will enter the renewable power generation market in Brazil. The Spanish company has just signed an agreement for a new wind project in Bahia, with a capacity of 850 megawatts, which is expected to require investments of at least €800 million.
The project includes two farms, Sento Sé I and II, which are still in the development and licensing stages. The construction is expected to start between the end of 2022 and the beginning of 2023. The main idea is to sell energy through long-term contracts with customers.
This should be just the company’s first step in the sector, but expansion is in the plans, said José Manuel Entrecanales, the company’s CEO, during a visit to Brazil last week. “The country has incomparable characteristics in the wind and photovoltaic sectors. There is a lot of demand for long-term power supply contracts,” he said.
The company already plans a second stage for the Sento Sé project and mulls building a solar power plant in an area contiguous to the wind farm that could use the same transmission infrastructure. The R$800 million project is expected to add 200 MW, according to preliminary figures.
“We also want to study new opportunities for joint development with Casa dos Ventos. There is a lot to do,” the executive said.
Acciona has been operating in Brazil for 20 years. Besides large construction projects, the company has operated Rodovia do Aço for ten years before selling the highway concession to KT2 in 2018. Since last year, the company is once more with a large contract: a line of São Paulo’s subway system. The concession initially held by Move São Paulo (formed by construction companies Odebrecht, UTC and Queiroz Galvão) was officially acquired at the end of 2020 by the Spanish group, which will build and operate the line.
The plan for the next decade is to substantially expand operations in Brazil, according to Entrecanales. “This country is as large as a continent. And there are growth drivers in all business fields in which Acciona operates: basic sanitation, water treatment, transportation, energy, urban mobility,” he said.
There is a plan for Brazil to surpass Europe in importance within the company in 10 years. In that case, Latin America’s largest economy would become one of the group’s three major operations alongside the United States and Australia. “Brazil has become an essential objective within our strategy.”
The scenario of political instability and fiscal and macroeconomic uncertainty does not reduce this interest, Mr. Entrecanales said. “Brazil, among the countries in which we operate, is the one with the most investment and development opportunities. It grows fast and has countless infrastructure needs, of all kinds. And there is a stable institutional organization. Yes, there is opposition and high political confrontation. But this is a characteristic of democracies. The country’s institutional solidity gives us a lot of confidence as investors,” he said.
Instability in the short run is important, but not decisive. “We are looking at the long term. In a 40-year project, the outlook of the first years plays a role, but it is not the most important thing.”
A concerning variable that can weigh on the decision of future investments is the legal security around the contract of Linha 6-Laranja, a subway line in the city of São Paulo, currently threatened by a ruling of the Federal Supreme Court (STF).
In August, an unexpected decision by Justice Dias Toffoli raised eyebrows in the market. He ruled that the transfer of concessions from one company to another would be unconstitutional and that any deal already carried out along these lines should be undone. That would directly impact the sale of the subway concession to Acciona. This is an old lawsuit, which had been stalled for years at the STF. Since the vote came out, there have already been signs that Justice Toffoli’s view can be reversed: Justice Gilmar Mendes requested more time to study the matter, and the rapporteur himself has signaled that he may change the ruling. But the case is still open.
“I cannot deny that this is a cause for concern. There is some risk, but the judicial events of the last few weeks, the economic rationale and the alternatives we have to solve this difficulty make me reasonably calm. Today we believe that it will be solved,” Mr. Entrecanales said.
Despite the ongoing imbroglio, Acciona is studying new projects. Among the targets are Trem Intercidades, a railroad between São Paulo and Campinas, sanitation auctions in several states, the concession of highway BR-381/262 between Minas Gerais and Espírito Santo and a real estate project in Salvador.
However, the executive highlighted the heavy financial commitments assumed in São Paulo’s subway and in the power project, and explained that it will be necessary to invest wisely.
The financing of Acciona’s projects underway has been done partially with cash from the parent company in Spain and with credit from the Brazilian Development Bank (BNDES) in Brazil. As for the new power project, the structure will depend on the clients and the long-term contracts signed – if it needs dollars, the financing will come from the parent company; if it needs reais, the company will take a loan in Brazil.
Acciona has operations in 60 countries and reported revenues of €6.4 billion in 2020.
Source: Valor international