In the recently concluded auction for transmission projects in Brazil, Sterlite Power emerged as the largest winner, clinching six lots at an investment of roughly $1 billion, securing about 65 per cent of the capex under auction.
While most of Brazil’s power supply historically came from large hydro power plants, renewable energy is coming up to in a big way to replace hydro and meet the rising power demand. This renewable capacity is generally located far away from the demand centers and require long connections to be served by these lines.
These critical projects will largely help move renewable power from northern and north eastern parts of Brazil with southern and southeastern regions where the load centers are located.By 2026, the total electricity consumption of the country is forecasted to increase to 741 TWh, indicating an average annual growth of 3.7 per cent per annum. To cater to this jump in demand, a 64.1 GW expansion in installed capacity of the National Interconnected System (SIN) is planned over the next 10-year period.
According to Group CEO of Sterlite Power, Pratik Agarwal said, “Brazil requires an incremental 61,800 km in transmission lines, and an increase of 199,200 MVA capacity. This translates to an investment of $30.8 billion in the ten-year period (2017-26). Along with the size of the opportunity, these projects allow us to live our core of empowering humanity by addressing the toughest challenges of energy delivery. This makes the market very attractive to us and we have already committed $1.7 billion of the planned $4 billion in the region. We intend to develop global partnerships to execute our global portfolio of projects.”
Brazilian power sector is characterised with policy and regulatory maturity. Given the strong contractual framework, including long concession tenures (30 years), inflation-protected revenues (which help lower the forex risk), and auction-based bidding for projects which happen on a pre-announced cadence, the Brazil market presents an ideal setup for any private transmission player, a release from Sterlite Power said.
More news from Brazilian utility ANEEL
The transmission auction (No. 2 of 2018) consisting of 20 lots was conducted on June 20, 2018, by Brazilian power utility ANEEL. The total investment envisaged in these projects is around R$6 billion (1 R$ is around INR18)
The projects are located in the following states: Alagoas, Bahia, Ceará, Goiás, Maranhão, Minas Gerais, Pará, Paraíba, Piauí, Rio Grande do Norte, Rio Grande do Sul, Rio Grande do Sul, Santa Catarina, São Paulo, Sergipe and Tocantins .
The auction gives the winning companies the completion of 2,562 km of transmission lines and 12,226 MVA of substation power.
According to André Pepitone da Nóbrega, Director of ANEEL, “The auction was extremely successful, with a clear demonstration of investor confidence in the Brazilian electricity sector,” he said.
The winning companies will be entitled to receive the Annual Revenue Allowance (RAP) for the provision of the service from the commercial operation of the ventures. The term of the works varies from 36 to 63 months, the concessions of 30 years are valid from the signing of the contracts. With the result of the event there is the expectation of generating 13.6 thousand direct jobs, a statement from ANEEL said.
