Brazil
Analysis

Projects to compete in Brazil power tender seen demanding nearly US$300mn

Bnamericas Published: Tuesday, September 20, 2022
Projects to compete in Brazil power tender seen demanding nearly US$300mn

Each power generation project expected to participate in Brazil’s next backup capacity tender will demand, on average, a 1.5bn reais (US$290mn) in capex for installed capacity of around 295MW. 

The information was provided to BNamericas by Rodrigo Florêncio, new business manager at insurance firm BMG Seguros, which is supporting clients who want to bid for 15-year contracts for gas-fired undertakings called for under the Eletrobras privatization law.

Scheduled to be held by Aneel on September 30, the auction will hire 1GW in the north, with delivery set to start December 2026, and 1GW in the northeast (700MW in Maranhão and 300MW in Piauí), with supply to begin one year later. 

Only greenfield projects with a maximum price of 450 reais/MWh will be eligible to participate, and the plants will operate with 70% of annual inflexibility, which means they will be working most of the time during the contract term.  

According to federal energy research company EPE, some 37 projects totaling 11,889MW of installed capacity were registered to participate. 

As reported by BNamericas, companies such as Eneva, BTG Pactual (through Geramar group), Dislub Equador, Evolution Power Partners, Estrutura, Gas Trading and Ponte Nova are among the potential bidders. 

Local sources close to the subject believe Pátria Investimentos, Petrocity, Neoenergia, Cobra Brasil, Celeo Redes Brasil and Cymi may also have submitted projects.  

Most undertakings have Mitsubishi or General Electric as the providers of the plants' power generation turbines. 

The public notice provides for the possibility of different types of guarantees, whether a public bond, corporate guarantee, bank guarantee, or guarantee insurance, which tends to be less expensive. 

"We usually receive projects that have not yet been granted a concession, and the guarantee insurance, in these cases, corresponds to 1% of the investment," Florêncio said.  

This first insurance works as a proposal guarantee, which is valid for around 180 days. 

"This is necessary to qualify the company's participation. Then comes the performance guarantee, which corresponds to 5% of the investment value and takes into account the construction period of the plant," he said. 

Florêncio added that proponents must prove sufficient expertise and financial capacity to execute the projects and the fundraising strategy, which, in general, is done via equity (30%) and bank debt (70%).

“We also analyze if the company already has access to the area where it intends to install the project and if it has a substation nearby, for example,” he said.  

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