Brazil’s latest power generation tenders bring in over US$80mn in contracts

Bnamericas Published: Monday, December 05, 2022
Brazil’s latest power generation tenders bring in over US$80mn in contracts

Brazil’s A-1 and A-2 power generation tenders attracted 440mn reais (US$83.7mn) in contracts.

Winning bidders in the auction held Friday by watchdog Aneel told BNamericas that the discounts reflected the favorable hydrological conditions and oversupply of energy, among other factors. 

In the A-1, Celpa, Cemar and CPFL Jaguari acquired 61MWa at a discount of 28.7%. Winning companies were Indra Energia, Libertha, and Safira.

The contracts involve injecting 1.1MMWh (million megawatt hours) into the grid between January 2023 and December 2024.

Source: mines and energy ministry (MME) 

In the A-2 auction, 144MWa were sold, with a discount of 12%. Supply involves 2.53MMWh between January 2024 and December 2025. 

Delta, Gold, São Roque, Stima and Trinity won the auction and will direct the energy to distributors Celpa (919,763MWh), Cemar (890,600MWh) and Coelce (715,972MWh).

Source: MME

For Libertha Energia, which started commercializing power only recently, the auction was an opportunity to mark its presence in the market. 

“The result of the auction reflects the country's current scenario of significant oversupply of energy, caused by the high rainfall index and the substantial reduction of load due to the pandemic,” a company spokesperson told BNamericas. 

“The load estimates and the large rainfall volumes reflect the auction selling price, which will certainly be beneficial to the final consumer, portraying an ideal moment for the organization of auctions to meet the load,” the spokesperson added.

Daniela Alcaro, a partner at Stima Energia, told BNamericas that the volumes negotiated were more expressive than the company expected, given the expansion of distributed generation and the recent discussions about market opening.

"The sale price was satisfactory as it came out in line with the prices practiced in the free market," she said.

Alcaro said the current prices reflect a downward outlook due to favorable hydrological conditions, reduced load forecasts for the next five years, strong growth in distributed generation, and the possibility of building power plants whose permits were issued in early 2022. 

The energy supplied by Stima will come from the portfolio of contracts signed with various market agents, including hydro, wind and biomass generators. 

João Sanchez, CEO of energy trader Trinity Energia, said there was little demand, concentrated at few distributors because most of them have surplus. 

“The load revisions and verifications of the last months have shown that the load is not performing as expected while the forecasts have also been reduced, which impacts the auctions,” he told BNamericas. 

Sanchez emphasized that the contract has the importance of selling energy in the northern submarket where demand is relatively lower. "The energy sale price was satisfactory as it involved a smaller submarket, where the energy price is generally lower in relation to the other submarkets," he said.

Raphael Vasques, Grupo Safira's management and market intelligence coordinator, said the auction was successful. 

"There were negotiations in both the A-1 and A-2. This allows the distributors to close their energy balances for the coming years and the retailers to get contracts with solid companies at competitive prices," he told BNamericas. 

According to Vasques, the sale price was satisfactory. "The auction was very competitive, and the final price was within the projections made by Safira Energia," he added. 

Susana Barbosa, director of São Roque Energética, said the company reached the intended objective with the sale of the 30MWa it had available for commercialization. "With this, in 2024 around 7% will remain for commercialization in the free market and we'll complete 100% of energy commercialized from 2025 on," she told BNamericas.

Barbosa considered the price of the energy sold – which will come from the São Roque hydroelectric plant in Santa Catarina – low from a market perspective and compared with the company's long-term contracts.  

"The auction therefore reflected the current moment of prices. The projection by [energy market intelligence platform] Dcide for 2024 is around 129 reais/MWh and for 2025 around 141 reais/MWh," she said. 

A spokesperson for Delta said the negotiation of about 200MWa was positive for sellers and buyers. 

"Delta Energia, which has commercialization in its portfolio, believes that it's important to participate in this process that aims to ensure the supply to distributors in the country. The energy supply that we commercialize in the auction will come from various sources of generation and counterparties," the spokesperson added.

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