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Brazil is preparing to hold transmission auction

Brazil, Brasilia: Brazil is preparing to hold its next auction of power transmission lines on 17 December, with a total of 1,958 km of new lines and 6,420 MVA in transformation capacity up for grabs in nine states in 11 separate lots.

The expected investments to be obtained under the contracts are estimated at US$1.37 B (7.4 B reais).

Brazil has held a total of 49 power transmission auctions since 1999, when it first opened up the sector to the participation of privately owned companies.

Although state-run Eletrobras remains the biggest power transmission operator in the country, managing some 71,042 km of lines (46.5 % of the total in Brazil), several companies have also started operating in Brazil since the 1999 reform, guaranteeing investments of $43.35 B (230 B reais). In the last two decades, some 324 lots have been sold of the 419 offered to buyers, according to data from regulator Aneel.

Brazil was originally expected to hold two transmission tenders this year, but the economic crisis caused by the coronavirus pandemic led to changes in the schedule.

Despite the economic crisis, there is an expectation that the upcoming auctions will be a success and attract large players, as low basic interest rates and stable rules have made investments in this infrastructure more attractive in recent years.

The latest auction, held in December 2019, again confirmed that the segment is thriving, with all winning bids coming in more than 50 % below the price caps, which demonstrated the fierce competition for contracts.

The appeal of the upcoming auctions is also guaranteed by the fact that several major electricity holding companies have been expanding their footprints in Brazil’s transmission sector in recent years, with acquisitions of new projects via tenders and in the secondary market. Companies previously focused on electricity generation and distribution, such as Neoenergia and Engie, have also recently acquired new transmission assets.

The largest revenues from projects that were acquired in tenders are still garnered mostly by companies focused on the transmission sector. The subsidiary of Chinese company State Grid, for example, currently operates 15,761 km of lines in 14 different Brazilian states, with annual permitted revenues of $650 M (3.46 B reais), while Taesa has annual permitted revenues of $600 M (3.2 B reais) and Alupar some $250 M (1.3bn reais).

Source: Bnamericas