How Vestas is expanding its business in Brazil

Bnamericas Published: Wednesday, December 07, 2022
How Vestas is expanding its business in Brazil

Denmark’s Vestas is reaping the rewards of its investments in increasing production capacity of wind turbines in Brazil. 

Currently, the manufacturer has about 6GW installed and a backlog of at least 3.5GW, in addition to more than 10GW of operation and maintenance contracts in the country, with an average duration of 20 years. 

The senior sales director of Vestas in Brazil, Eric Gomes, says the company has managed, in recent years, to expand its customer base. 

In this interview, Gomes analyzed Vestas' performance in Brazil and the local business outlook.

BNamericas: What are the main business opportunities in Brazil for Vestas? 

Gomes: Before answering this question, I’d like to give a little general background on the company. Vestas started, back in the 19th century, as a supplier of agricultural implements in Denmark. In the 1970s, we were the pioneering industry for wind power, in the midst of the international oil crisis. In 43 years in the wind industry, we’ve installed over 84,000 wind turbines in 86 countries, with total installed capacity of more than 160GW of wind turbines and 140GW of operation and maintenance contracts.

Brazil has 84% of its electric matrix renewable. It’s a key country within the global context. Vestas Latam, created in January 2022, is an independent business unit reporting directly to Denmark. Before that, we were a sub-region within another business unit. This was a move to bet on Latin America, where Brazil is the main market.

We’ve been present in Brazil since 2008, when we opened our first office. The first plant was opened in 2011, in the state of Ceará. And, since 2016, we have a new factory, in the same state, to produce wind turbines already under the scope of the new Finame [program for financing the production and acquisition of national machinery and equipment accredited at development bank BNDES] rules. Three years later we doubled the capacity of the second factory. 

Today we have about 6GW of installed capacity, between turbines from our first investment cycle, which were 2MW, and the most recent ones, with power between 4.2MW and 4.5MW. 

It was a very fruitful investment cycle, a wise decision to localize the V-150 technology. We’ve already commercialized more than 8GW of 4.2MW or 4.5MW V-150 wind turbines, of which we’ve executed 4.5GW. So we have a backlog of 3.5GW still in the pipeline, just in terms of firm contracts, not counting other projects where we’re preferred suppliers. 

The 4MW platform provided us with this commercial success because it’s versatile and flexible to the different wind profiles that exist here in Brazil. 

All our contracts are also accompanied by full-scope operation and maintenance contracts. There are about 10GW of O&M contracts in the portfolio, in addition to 1GW of O&M involving third-party turbines. 

In the case of wind blades and towers, our strategy is outsourcing. We have alliances with third parties, who produce with Vestas’ design and technology. 

BNamericas: What are the main ongoing contracts in the country, or at least the most recent ones?

Gomes: In these last four-and-a-half years of the V-150, we were able to broaden our customer base. Before, with the 2MW turbines, we were more positioned with the European independent power generators, such as Enel and EDF. More recently, besides remaining close to traditional European customers, including EDP and Engie, with whom we closed the largest contract in Latin America for the Serra do Assuruá project, we sealed alliances with strong customers in Brazil, such as Casa dos Ventos, Ômega Energia, Votorantim Energia, Brookfield's Elera Renováveis and PEC Energia, which is one of the main project developers in Brazil, and the energy trader 2W Energia. In the third quarter, we signed a contract with Polimix, a cement and concrete manufacturer that has an energy arm for self-production of energy, in order to achieve sustainability and decarbonization goals. 

Therefore, we have a very broad and diverse portfolio. 

BNamericas: Does Vestas have plans for growth and investments in Brazil?

Gomes: I’d say, if I can summarize, that this is a continuous work. The Brazilian market has a specificity, which is its local content policy. We always need good management of the supply chain, because we deal with an industry that’s very specific. We’ve had to develop more sub-suppliers for different components in order to better manage the supply chain risks. 

The world has experienced brutal supply chain disruptions. The pandemic brought this, the war in Ukraine accentuated it, generating imbalances between supply and demand that were also reflected in Brazil. So, to gain more versatility, we announced this year an alliance to produce blades with LM. Before, the partnership was only with Aeris, with which we continue. 

It’s a win-win, because, while we generate better risk management of the chain, we create more jobs. This is another legacy of the local content policy, as well as the quality control processes and safety criteria, the sharing of best practices and some technologies, with the entire local supply chain. 

On O&M, we recently closed a memorandum of understanding with the government of Rio Grande do Norte to expand a service center near [state capital] Natal, where we also have a training center and a warehouse. This is due to new projects coming on stream in the next few years. We have long-term contracts, up to 28 years, for O&M, so this requires management of this operation and maintenance, to supply spare parts. 

We own another O&M center, in Bahia, where we already have a large installed base, with the perspective of new projects. 

We have more than 10,000 O&M field technicians globally, and this is a very strong vector for growth and job generation in Brazil. 

BNamericas: How is the occupancy of the company's plants and service units in the country?

Gomes: What I can say is that we have a load of projects supplying our factory until the end of 2024. And within this outsourcing strategy for blades and towers, our suppliers are very busy. And we’re evaluating possible new investments. 

The legacy of the wind industry involves not only the execution of the project, which lasts between two and two-and-a-half years, but the O&M contract, which can last more than 20 years. We have a full scope O&M backlog averaging close to 20 years, for these 10GW of Vestas turbines. This provides permanent investments and job generation. 

BNamericas: Do your products also have financing from the Banco do Nordeste [BNB]?

Gomes: Finame is a regime governed by BNDES, which has an accreditation area that manages the financing for the industry. Besides this, BNDES has a project financing area. 

BNB is another financing agent for wind projects, as long as they use turbines manufactured under Finame. We have several projects that are being or will be financed by BNB. They are our clients who take the financing with the precondition of using turbines under Finame. 

BNamericas: Are there many logistical challenges in Brazil, considering the large dimensions of the wind equipment?

Gomes: Whenever we talk to our colleagues from other countries, the infrastructure in Brazil appears as a point of concern. There are several logistical bottlenecks in the country. The projects are mainly located in the northeast region, many of them in the interior of Bahia. In some of these projects, the distance for transportation of the blades reaches 2,000km. For a European, this is crazy. [Local wind energy association] Abeeólica does an important job of working with transporters and with the PRF [federal highway patrol] to oversee the transportation of the blades, for example. These are bottlenecks that were aggravated by crises in recent years. The pandemic coincided with a boom in wind projects that came in the wake of the 'gold rush' with the end of the TUSD and TUST [distribution and transmission system use taxes] discounts for renewable projects. 

BNamericas: Does Vestas believe in the potential of the offshore wind market here?

Gomes: Absolutely. Offshore, in a country with 7,500km of coastline and such blessed winds, it cannot be ignored. 

The maturation cycle of an offshore project is practically double that of an onshore project, considering the beginning of project development, with the wind measurement campaign and licensing, and its implementation. It takes 12, 15 years. This is in addition to the issue of regulation, which is being discussed at the moment. But we see offshore as a way to expand Brazil's electric and energy matrix, as well as a vector of an industrial policy that will create skilled jobs and will explore synergies with the oil and gas and port industries. In the horizon of projects designed for Brazil starting in 2030, we believe that there will be a better level of competitiveness of local projects, and offshore wind will be a reality in the Brazilian matrix. 

When we look at the Brazilian coast, we’re talking about bottom-fixed technology, fixed on the seabed, which is cheaper than the floating technology, which is being considered for southeast Asia and some countries in Europe, for example. These 7,500km are all bottom fixed, that is, in places less than 50m deep. It’s a more consolidated installation technology.

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