Guascor prepares to export 450 diesel generators

Thursday, February 16, 2006

Spanish power company Guascor is concluding negotiations to export 450 diesel-fired power generation units to Cuba starting in 2006, Marcela Bragatto, CFO of the company's Brazilian unit Guascor Brasil told BNamericas.

The decision by Cuba's government to import the equipment came after appraisals made by Cuban officials of Guascor's operations in isolated regions in northern Brazil, Bragatto said.

Bragatto declined to give contract details but international press reported the contract could reach 100mn euros (today US$119mn) and is part of the Cuban government's efforts to increase power supply through small generation plants.

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Guascor operates 71 gas generation units in northern Brazil with a combined installed capacity of some 160MW.

"These units are mostly located in isolated towns in the Amazon jungle not linked to the national transmission grid," Bragatto said. "Such characteristics attracted Cuban interest since they are trying to rebuild the power system there."

Initially the diesel generation units will be supplied by Guascor's headquarters in Spain, adapted to tropical conditions with know-how built up in the company's Brazilian operations.

"In 10 years of operations in Brazil, we built up technical knowledge of how to operate under higher temperatures and tropical weather conditions in distant regions," Bragatto said. "We learned to guarantee 24 hour operations in small jungle towns."

The company's Brazilian operations will supply support services to the Cuban operations, which includes arranging logistics for diesel supply and regular maintenance of the generation units.

In Brazil, Guascor's operations have long-term power sale contracts with local power distribution companies in the states of Pará, Rondônia and Acre, all in the Amazon jungle region.

In all, Guascor's 71 Brazilian units supply power to 1.7 million inhabitants.

Guascor has recently received authorization to assemble turbines within Brazil and is carrying out feasibility studies for the construction of a factory with capacity to produce 600 generation units a year in the country, from where it plans to supply equipment to expand capacity of its Brazilian operations and export to other Latin American and Caribbean countries, Asia and Africa, Bragatto said.

Among the countries where Guascor has started making contacts to export the generation units are Venezuela, Ecuador and Colombia, he added.

Guascor has concentrated in small-scale power generation projects in Brazil after giving up initial plans to invest in medium-sized hydroelectric generation. In the mid-1990s Guascor won concessions for the 290MW Croumbá III and the 159MW Ourinhos projects but sold its stakes as it faced delays in environmental licensing and selling the power.

"It took too long to obtain power purchase contracts and this led to a lack of financing," she said.

Since then the company has invested in small-scale diesel-fired and hydroelectric generation in Brazil. Aside from thermoelectric generation, the company also has 195MW installed capacity from its six small-scale hydroelectric plants.

It is through small-scale generation operations that the company plans to grow in the coming years. In 2006, the company expects a 10% increase in revenue in Brazil, Bragatto said.

There is already demand for another 178MW of power in the northern region in coming years and the company is eyeing markets in other northern region states and in the center west region, Bragatto said.

Guascor also expects to conclude this year negotiations to finance the construction of five small-scale hydroelectric power projects with a combined capacity of 120MW, Bragatto said.

But the northern region is where the company will concentrate its efforts.

"Power demand grows fast in the northern region after you start supplying power for 24 hours a day," she said, adding demand in the northern region where Guascor operates grows at a rate of 9% year.

"Brazil is an interesting market and very few places in the world have this kind of yearly growth," she said.

In fact Guascor's Brazilian operations have been very profitable, with a return on investment of over 15% a year in the past 10 years, Bragatto said.