Country is entitled to access part of the company’s $15bn fund

09/22/2022

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André Flores — Foto: Silvia Zamboni/Valor

Brookfield is willing to invest in projects related to energy transition and low carbon economy. Within that plan, Brazil is one of the main countries in the world with chances to receive multimillion investments in the coming years.

Brookfield’s Global Transition Fund (BGTF) recently raised $15 billion — the largest amount of private capital ever raised to support the transition to a low-carbon economy — and executives are looking to do business in Brazil.

The asset management company has always displaced the investments in power generation. Now, by demand of the investors themselves, it directs the attention also to sectors that can also contribute to the mitigation of emissions.

In an interview to Valor, Brookfield’s head of Renewable Energy and Transition, André Flores, says that the investments are conditioned to an additionality character focused on business transformation, renewable energy and sustainable solutions.

“The funds we invested in before were infrastructure funds more broadly, but investors were looking for funds exclusively dedicated to energy transition. The initial demand for this fund was higher than we expected. Our fundraising goal was $7billion and we ended up with $15 billion,” Mr. Flores says.

The money is not earmarked for any country and is released as local managers find opportunities with good rates of return. Almost half of the amount has already been allocated in large economies such as the U.S., Canada and the UK.

The executive sees no chances of Brazil being left out of this or other funds specific to the energy transition but gives signs that a way to accelerate this would be more regulation and legal security for new technologies.

Brookfield is still looking for opportunities here, but the lack of a legal framework for some segments that are beginning to emerge, such as the carbon market, batteries, and offshore wind power, for example, still hinder more aggressive investments.

“Do I see a carbon capture market in Brazil today? No. But we see some markets out there already developed. The storage market still depends on regulation and clear incentives. Obviously, they can launch a capacity market auction, but there isn’t a remuneration system outside the auction that justifies the investment”, he says.

The executive adds that the demand is also on the part of consumers with increasingly bolder portfolio decarbonization goals with long-term contracts and costs that make clean energy viable.

“In Brazil there is not a specific rule, and nothing is mandatory, such as a carbon tax for companies. So, we note that this is a voluntary movement through consumer pressure and adoption of targets.”

Mr. Flores believes that as soon as this fund is fully invested, the company will present an even larger one, as has been the case with infrastructure funds, which have already launched five. “We bet that Brazil will be the great receiver of these resources in the future.”

Of the R$159 billion in assets under management in Brazil, R$27 billion are concentrated in renewable energies, mainly in hydroelectric and wind power plants under operation by Elera Renováveis. Last year, in buying and selling assets, the amount was R$10 billion in acquisitions and R$5.5 billion in capital recycling activities.

The solar source had a strong debut in the radar of the Brooksfield, and there are already 11 parks under construction, the most important of which the Janaúba plant, the largest solar enterprise under construction, totaling 1.2 GWp of installed capacity and investments totaling R$2.3 billion — in addition to the private equity fund that bought Aldo Solar, the largest distributor of solar equipment.

It seems that the distributed generation segment should be one of the next in line to receive resources, given the growing demand for capital to make the projects viable.

“Our idea is to be builders, owners, and operators of distributed power parks. In this gold rush there are gigawatts of projects with access applications or already underway. I see our entry much more in this,” he expects.

The bottlenecks in the electrical sector are also candidates to receive an important slice of the resources. Brookfield owns Quantum and recently sold 2,420 kilometers of mature transmission lines in the Northeast and Minas Gerais for $834 million to Argo Energia, but has almost twice as much under construction, besides being present in all the auctions of the segment.

The increase in capex in Brookfield’s business, on the other hand, squeezed investors’ margins a bit, mainly due to the rise in commodities and inputs. However, the market reaction fostered a balance, and the prices of long-term contracts followed the movement.

*By Robson Rodrigues — São Paulo

Source: Valor International

https://valorinternational.globo.com/