There's 'a window of opportunity for power transmission in Brazil'

Tuesday, October 18, 2016

Luiz Coimbra, Alupar's IR manager, spoke to BNamericas about the future plans of Brazil's biggest private power transmission company. 

He also talked about Brazilian energy regulator Aneel's plan to put out to tender 30bn reais (US$9.4bn) in power transmission auctions in 2016, which is way more than the usual figure.

BNamericas: Alupar has developed its portfolio with assets in both power generation and transmission. What is the company's position today in each of these markets?

Coimbra: Alupar is a private investment holding that focuses on power generation and transmission. Today, the company operates in Brazil, Colombia and Peru. We also had a transmission line in Chile, which was recently sold. In Brazil, Alupar operates 4,950km of transmission lines. About 80% of our Ebitda today comes from transmission assets, and 20% from generation. Alupar is the biggest 100% private power transmission company in Brazil.

Now if we look at power generation, Alupar is focused on small and medium-sized plants. We don't have any interest in projects like Belo Monte, Jirau and Santo Antônio, which are huge hydropower plants. Our biggest plant is a hydropower one, called Ferreira Gomes, which has 250MW of installed capacity. We also have a number of small hydropower plants and five wind plants in Ceará [state in northeast Brazil]. In Brazil, Colombia and Peru, Alupar's power generation assets total 687MW of installed capacity. We've just finished the construction of 20MW in Colombia and we're currently taking more 84MW to Peru.

BNamericas: Would you say Alupar's focus will still be power transmission in the coming years?

Coimbra: These markets operate in a cyclical manner. Sometimes the transmission market is better and generation is worse, and sometimes it's the opposite. Today, I would say Alupar is more focused on power transmission, on expanding our business. Over the last years, Brazil has had to deal with a major transmission bottleneck, which is a big problem for the entire energy industry. Many of the transmission lines are lagging behind the construction schedule.

Aneel plans to put out to tender 30bn reais of transmission projects in 2016. This is way more than what is usually bid per year, about 5bn or 6bn reais, which means there's a window of opportunity for power transmission in Brazil right now.

BNamericas: Alupar didn't bid in the recent transmission auctions, until the last one in April this year. Why did the company decide to bid in that one?

Coimbra: We were registered in all of the last auctions, but we didn't make any bids in some of them because we didn't find the conditions interesting for us. Alupar has a true financial mindset. Our focus is to be an investment holding, so we're always checking what financial returns each project will guarantee us. Investors should not be too flexible with this kind of decision, because it involves risks in construction, uncertainties of the environmental licensing process, land issues, just to name a few. This last auction, in April, had some attractive returns. Because of that, Alupar bid and won two projects, not huge ones, of 40mn reais. [Development bank] BNDES' credit line also helped us create a good financial structure.

BNamericas: What about the next transmission auction, scheduled for October 28?

Coimbra: In recent weeks, Alupar has been analyzing risks that each project involves. Next, we start to develop our formula to calculate returns, so we can find the most interesting projects. Then, we'll be able to decide whether we want to participate or not. We believe there will be interesting assets, but we cannot confirm that yet.

About Luiz Coimbra

Luiz Coimbra is the investor relations manager of Alupar. He has a degree in economics from PUC-SP, specialized in finance. Coimbra has more than eight years of experience in the electric power sector.