Posts

Saudi Arabia’s investment fund targets technology, renewables, and soccer in Brazil

Strategic expansion focuses on key sectors, highlighting Brazil’s role in renewable energy and AI’s growing energy demands

12/06/2024

The Governor of Saudi Arabia’s Public Investment Fund (PIF), Yasir Al-Rumayyan, expressed keen interest in broadening Saudi investments in Brazil. “We started investing in 2016 through one of our subsidiaries. Now we are focusing on technology, renewable energies, if all goes well, football,” he said at the FII Priority Summit in Rio, an international meeting of leaders and executives that takes place on Wednesday (12) in Rio.

Mr. Al-Rumayyan, who also serves as chairman of the board of the state oil company Aramco and president of the FII Institute, shared that about 80% of PIF’s investments are domestic, primarily in greenfield projects aimed at job creation. “Our remaining 20%, amounting to around $200 billion, is targeted internationally,” he said.

The executive emphasized Saudi Arabia’s commitment to sustainability, stating that the nation is a leader in renewable energy. He noted that fossil fuels can no longer be the basis of business, explaining Aramco’s strategy to decrease oil production and ramp up investment in renewable energy sources.

Mr. Al-Rumayyan raised a crucial issue that often goes unaddressed—the significant increase in energy consumption driven by advances in artificial intelligence.

“Energy consumption is going to rise substantially with artificial intelligence. The energy needed for one day of ChatGPT is equivalent to the annual consumption of 273,000 homes in California. This presents a major challenge globally, and we must seek renewable energy solutions to power such technologies,” he explained.

He further underscored Brazil’s potential as a “key player” in the renewable energy sector. “Brazil is very well positioned to be one of the key players [in renewable energy]. What it needs is good regulation and the right people, like those who are here,” he noted.

*Por Victoria Netto, Lucianne Carneiro — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
/by

Gerdau targets renewables to move forward with decarbonization

Company will invest R$1.5bn in renewable energy to become more competitive in steel sector

11/30/2022

The announcement that Gerdau has entered into a partnership with asset-management Newave Capital (NW Capital) to purchase a 33.33% stake in Newave Energia puts the steelmaker at a new level in decarbonizing production, in addition to diversifying its business and making it more competitive in the steel sector.

The plan aims to develop new large-scale (greenfield) power generation projects with a capacity of approximately 2.5 GW, exclusively from solar or wind sources. Part of the production also aims to supply Gerdau’s industrial units in Brazil with renewable energy, as part of its commitment to reduce its greenhouse gas emissions, which are quite intense in electro-intensive sectors such as metallurgy.

Through Gerdau Next the company will invest up to R$1.5 billion of equity capital in Newave Energia, divided into two stages. In the first phase, the company will invest R$500 million in 2023, and the second phase will include an investment of up to R$1 billion, conditioned to the achievement of performance goals.

Juliano Prado — Foto: Claudio Belli/Valor

Juliano Prado — Foto: Claudio Belli/Valor

Juliano Prado, vice president of Gerdau and leader of Gerdau Next, told Valor that the business is based on the pillar of sustainability for the reduction of carbon emissions by 10% within ten years, seeking to reach 60% of energy needs through self-production. Today it is 25%.

In parallel, the company aims to reduce its greenhouse gas emissions (CO2e) of scopes 1 and 2 of its inventory, to 0.83 tonnes of CO2 per tonne of steel in 2031, a value approximately 50% lower than the global average of the steel industry.

“Today we have a designed and prospected pipeline of six greenfield energy parks. When these parks come into operation, or Newave acquires a new park, the plan is that 30% of the energy produced will go to our self-production. We are talking about Newave reaching close to 2.5 GW both in solar and wind”, he said.

The free energy market is a segment that the company is keeping an eye on to expand its business. Brazil currently has about 10,700 free consumers, but the government’s proposal that all consumers served at high voltage can opt to buy electricity from any supplier as of January 1, 2024, opens space for new competitors.

“The other 70% of the energy produced will be commercialized in the free market. We also want to have a leading role in having more accessible prices for businesses that want to buy from Newave Energia,” said Mr. Prado.

In the energy transition context, partnerships such as this one have been taking place more frequently in the electric sector, in which oil, metallurgy, and steel companies, for example, associate with other companies to have some competitive differential.

In Gerdau’s case, decreasing the cost of steel was one of the differentials to closing the deal. Besides being the most competitive in the country with a prominent place in the expansion of the system, subsidized energy sources such as solar and wind have contracting benefits to other conventional sources.

“This R$1.5 billion foreseen in our business plan for investments in Newave is equity capital. Another R$3 billion will come from the asset-management firm Newave Capital and XP, meaning we will also have third-party capital”, he states.

New projects usually have a higher risk, but with higher gains. And because it is strategic information, Mr. Prado does not reveal how much the investments will reduce production costs, but he stresses that the project gains are above the cost of capital with high double digits.

He sees the governance and the team as a differential advantage, with professionals from large energy companies, such as Siemens Gamesa and Echoenergia, among others.

This is not the only investment in renewables and the executive guarantees that it will not be the last. There are others, besides the production mix with scrap and charcoal that supply the carbonization plants in the pig iron and steel chain.

*By Robson Rodrigues — São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

Auren Energia debuts on B3 with eye on renewables

Auren Energia, antiga Cesp, conclui listagem no Novo Mercado da B3 | Portal Solar

Auren Energia, a power generation company created from assets of Votorantim and CPP Investments, debuted in Novo Mercado, the strictest governance segment of the Brazilian exchange B3, valued at R$16 billion. Auren plans to expand and be among the leaders of the industry and says it is ready for acquisitions of renewable assets, a segment defined as its business focus.

Among the operations is Companhia de Energia do Estado de São Paulo (CESP), which became a subsidiary of Auren and accounts for a relevant share of the company’s generation portfolio.

With pro-forma net operating income of R$6.5 billion last year – including Votorantim Energia, VTRM (wind power assets) and CESP – the power company closed its first day on the B3 up 1.91%, encouraging investors who bet on the strategy.

The portfolio has 3.3 GW of capacity, with some ongoing projects expected to start operating this year, and the company is flush of cash. There is about R$1.5 billion to be invested in new projects. The company’s goal is to reach 5.2 GW by 2026, reducing the exposure to hydro sources, which today accounts for more than 70% of the pipeline.

CEO Fabio Zanfelice told Valor he intends to grow in renewable energies and in the free energy market. He also said that the new company was created to invest in assets in the electric sector.

Besides being capitalized and net debt-to-EBITDA ratio of 1.5 times, the company says it is able to take debts for mergers and acquisitions. However, in the current context of escalating interest rates and high capital costs, the company is likely to go shopping with its own capital.

In the market there is a menu of power generation companies for sale, such as the assets of Eletrobras – and the state-owned company itself, which may be privatized – , Ibitu, Rio Energy, Renova and EDP plants. “We are prepared to make any acquisition of any size in the sector today,” said Mr. Zanfelice, without elaborating. “We are capitalized, we have financial and technical capacity to make acquisitions and we will continue to evaluate assets, besides organic growth.”

One way is through solar generation, with ongoing projects that will add 1.7 GW. According to the company’s goal, the source will account for 34% of a 5.2 GW portfolio in four years.

Auren has two solar projects to develop in Brazil, but the challenge in reaching this goal lies in the pressure from the production chains. Last year, the cost of solar panels rose about 8% driven by the cost of freight, the surge in commodity prices and exchange rate volatility, which may cause some generation companies to revise investments.

“We have time to observe the evolution of prices and we consider that the prices of solar panels were impacted by the pandemic, production factors in China, and logistics, but within our strategy we have time to acquire equipment. But if this scenario of equipment costs persists, both solar and wind, sooner or later we will see an increase in the price of power in the long term,” he said.

In wind power generation, Auren currently operates farms in Piauí that have an installed generating capacity of 600 MW. Another 400 MW are expected to start operating by the end of the year. CESP’s generation capacity, with emphasis on the Porto Primavera plant, is 1,624 MW, of a total of 2.3 GW of hydro sources in operation and 160 MW (small plants) under development. The company is also setting up a 68 MW hybrid complex (wind and solar) in Piauí, alongside its assets.

In the commercialization activity, the company’s executives believe that the current business has conditions to be much bolder. The company has 2.6 average GW of power commercialized and about 500 clients.

With the modernization of the electric sector, through bill 414/2021 (currently making its way in Congress), in which one pillar is the growth of the free market, the strategy for this segment goes from power management for new smaller clients, digitalization of commercialization, and even low power clients.

“The expectation is that we will have smaller customers with a slightly higher margin on those products they will demand. Our goal is to increase twofold the number of customers and reach 1,000 customers in a year’s time,” he said.

In the restructuring and incorporation of assets for the formation of Auren, the controlling shareholders are Votorantim S.A., with 37.7%, and CPP Investments, with 32.1%. The remainder (30.2%) are held by minority shareholders in CESP who migrated to the new company, now robust and with a diversified portfolio of assets.

Source: Valor International

https://valorinternational.globo.com

/by