There will be 13 lots for construction, maintenance of 5,425 km
06/29/2022
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In total, 13 lots will be auctioned for construction and maintenance of 5,425 km of transmission lines — Foto: Custódio Coimbra/Agência O Globo
The most awaited auction of the Brazilian electricity sector held by the National Agency of Electrical Energy (Aneel) takes place Thursday, June 30, at the B3 headquarters in São Paulo, with the expectation of at least R$15.3 billion in investments. There will be 13 lots for the construction and maintenance of 5,425 km of transmission lines and 6,180 megavolt-amps (MVA) in substation transformation capacity.
According to the calculations of the Ministry of Mines and Energy (MME), the contest is likely to draw the largest amount of investment in the segment since 2019. The transmission segment is the safest in the electric sector. It is fully regulated, and the winner gets a 30-year contract indexed to the IPCA (Brazil’s benchmark inflation index) with zero risk of default.
The projects, with a conclusion period of 42 to 60 months, will be implemented in the states of Acre, Amapá, Amazonas, Bahia, Espírito Santo, Mato Grosso, Mato Grosso do Sul, Minas Gerais, Pará, Rondônia, Santa Catarina, São Paulo and Sergipe. The government expects the creation of 31,600 jobs.
Lots 1, 2 and 3 are the ones that draw most attention for the robustness of the investments: almost R$12.3 billion. The largest of these is number 2, which cuts through the states of Minas Gerais and São Paulo over a distance of 1,700 kilometers. The purpose of the lot is to expand the transmission capacity in the northern region of Minas Gerais and, if completed, will employ 9,800 people.
The total value of the reference allowed annual revenues (RAP) to be paid to the entrepreneurs is approximately R$2.2 billion. The bidding will be based on the value of the RAP. The winner will be the bidder that presents the lowest value of RAP in reais per year.
André Fonseca, head of strategic financial services at Thymos Energia, believes that the auction will be of great competition with the presence of traditional companies in the sector, but the costs of the projects may be higher. “We have a scenario of higher capex and higher debt cost, which reflects in higher RAPs. Even so, the expectation is for high discounts,” he said.
Today Brazil has almost 170,000 kilometers of transmission lines, according to data from Brazil’s national grid operator ONS. Despite that, the segment still suffers from bottlenecks to drain all the power production. The goal is that by 2026 Brazil will have almost 202,000 kilometers of lines.
“The expansion of the transmission grid allows for better management of power resources. In the Northeast region, it expands the possibility of outflow of new renewable generation – mainly wind. In addition, the auction brings other benefits to society, such as improved service conditions in the states of Acre and Amazonas, especially the integration of the Humaitá (Amazonas) region, which is currently isolated from the National Interconnected System (SIN), said ONS Director-General Luiz Carlos Ciocchi.
For the professor at the Economics Institute of the Federal University of Rio de Janeiro (UFRJ) and coordinator of the Electric Sector Study Group (Gesel), Nivalde de Castro, the auction remains in line with the strategy that the formulators of the electric sector have adopted to meet the potential growth of renewable generation in Brazil.
“The auction is designed to meet expected demands, especially due to the growth of wind and solar sources, which require widespread number of lines. They serve 13 states, with investments of R$15 billion with a maximum delivery term of five years in small, medium and large lots,” he said.
In the transmission sector, the expectation is good. The Brazilian Association of Electric Energy Transmission Companies (Abrate) believes that all the lots will be auctioned with strong discounts.
“The expectation is the same as the last auctions, occasions in which all the lots were bought. In the last auction [in 2021], the situation was identical to the current one and the discount was above 50%. Therefore, this trend of strong discounts may happen again,” says the technical head of Abrate, Geraldo Pontelo.
He says that the investment in each lot of venture to be fought over is calculated by Aneel’s Reference Price Bank, whose nominal values remain the same compared to the last auction.
Mr. Castro, with the UFRJ, has a different view. The researcher evaluates that the macroeconomic conditions have changed. In his view, inflation is the main element that has increased costs, and this may not have been captured in the formulation of the costs of the projects, since the values were released well in advance.
“On the other hand, inflation ends up helping the business, because tariffs are adjusted by inflation. There must be a great demand, since it is the safest business in the electric sector, without regulatory risk and the Congress cannot interfere or give an opinion, as it has been doing in the generation and distribution segments,” he says.
*By Robson Rodrigues — São Paulo
Source: Valor International