The global financial crisis likely will scare off foreign companies in Brazilian power regulator Aneel's October 31 auction to build and operate 2,440km of transmission lines, an industry analyst told BNamericas.
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The lines would link hydro plants on the Madeira river in the Amazon to São Paulo state.
"With the escalation of the crisis, I don't even think Spanish companies, which have a history of bidding in these types of auctions, will participate," said Rosângela Ribeiro, a market analyst at brokerage SLW.
Subsidiaries of federal energy holding group Eletrobrás dominated the October 3 transmission line auction, snapping up two lines and six substations in total.
The same thing could happen in the Madeira transmission auction, according to Ribeiro.
"If there's neither strong competition nor foreign players, the government will probably use companies from the Eletrobrás group to bid due to the importance of those lines," she said.
"But the lack of international players could stimulate private companies in Brazil. I heard [energy companies] Cemig (NYSE: CIG) and Terna Participações are forming a consortium to bid," Ribeiro said.
Weak competition could translate into higher offers, increasing the project's profitability. In Brazilian power auctions, the bidder that offers the lowest price wins.
Despite the crisis, chances are remote the government will postpone the auction. Rumors surfaced this week that some companies and energy organizations were pushing for a delay.
"I believe the timeline will be kept, especially because [national development bank] BNDES will finance about 70% of the construction work, which is estimated at roughly 7bn reais [US$3.2bn]," the analyst said.
