Brazil's Copel projects high hydropower contracting in auction

Brazil's backup capacity auction (LRCAP) in March should result in a “high contracting” of hydroelectric capacity, Copel CEO Daniel Slaviero told a conference call with investors on Friday (February 27).

According to the executive, the best option for the National Interconnected System (SIN) is a significant supply of hydric products, with the start of delivery scheduled for 2030 and 2031, in 10- and 15-year contracts, respectively.

“We're convinced that the MME [mines and energy ministry] has this sensitivity, and for Copel, the LRCAP is an opportunity for value creation that will drive our strategy through the year 2035,” emphasized Slaviero.

The Paraná state-based company plans to compete with two projects in the tender: the 860MW expansion of the Foz do Areia hydropower plant (UHE) and the 1,266MW expansion of the Segredo UHE.

If they are contracted, Foz do Areia will become the ninth-largest hydropower plant in the country, with 2.536MW of installed capacity, and Segredo, the tenth, with 2.526MW.

Both projects have installation licenses, evacuation margin, and an engineering, procurement, and construction (EPC) pre-contract.

Scheduled for March 18, the LRCAP will be divided into two auctions. One will contract capacity from hydropower plants (UHE) and natural gas and coal-fired thermal power plants (UTE). The other will trade capacity from diesel oil, fuel oil, and biodiesel thermal power plants.

The auctions will contract electric power based on the availability of existing plants, new plants, and hydropower plants with expansion prospects.

In the auction for hydropower plants and gas- and coal-fired thermal plants, 330 projects were submitted, totaling 120.386MW – 311 natural gas thermal plants, three coal thermal plants, and 16 hydropower plant expansions. The LRCAP for diesel oil, fuel oil, and biodiesel thermal plants registered 38 projects, totaling 5.890MW – 18 oil-fired thermal plants and 20 biodiesel plants.

Slaviero believes that the price cap established for the hydroelectric plants in the next auction is “tight”, but reiterated that the company is prepared to compete in the tender with mature, licensed projects.

"What I can say with certainty, even from what we are seeing, is that the hydric product will be the lowest-cost one, and this will be most beneficial for consumers, for electricity rate moderation", he noted.

Investments and M&A

Copel’s business plan foresees investments of 18 billion reais (US$3.5bn) between 2026 and 2030.

Of the total, 13 billion reais will be allocated to power distribution, 1.9 billion reais to generation, and 1.8 billion reais to transmission.

The company sees around 12GW in merger and acquisition opportunities for hydropower plants with contracts up for renewal, in addition to the 19 distribution concessions that will be renewed.

(The original version of this content was written in Portuguese)