India has made a beginning in winning concessions in Brazil’s power transmission market, and with Brazil planning more such auctions, the opportunities for Indian companies appear bright. According to H.E. Rosimar Suzano, Consul General, Consulate General of Brazil in Mumbai, Indian companies like Sterlite Power have already won concessions in the power transmission space in Brazil, and Indian power transmission utility Power Grid Corporation of India has also evinced interest. Suzano was speaking at the IEEMA Convention 2017 that witnessed a series of presentations by diplomats of several countries, on the theme “Make in India – Enhancing Global Footprint.”
Outlining opportunities for foreign companies to invest in Brazil, Rosimar Suzano observed that the Brazilian economy was now recovering after suffering a slowdown in 2015, which also impacted bilateral trade. “Good sign for the economy is that inflation is also going down and the level of confidence is increasing,” Suzano stressed, alluding to the onset of economic revival in Brazil.
“Even though we import a lot from Asian countries, we are importing more from China, South Korea, Taiwan, Hong Kong, Thailand, Malaysia and Vietnam.”
An interesting observation that the Brazilian diplomat in Mumbai made was of imports of electrical equipment from India. Though Brazil makes significant imports from Asian countries, India’s share is quite low. As Suzano put it, “The challenge for Indian suppliers is that you are behind some of your neighbours. Even though we import a lot from Asian countries, we are importing more from China, South Korea, Taiwan, Hong Kong, Thailand, Malaysia and Vietnam.” She however saw this as a clear opportunity for Indian suppliers. “I am convinced that there is scope for India to increase its presence,” emphasized Suzano. It may be mentioned Brazil is planning to auction as many as 57 projects, by 2019, covering core areas like oil & gas, mining, electricity, highways, seaports, airports, etc.
“I am convinced that there is scope for Indian to increase its presence”
Coming back to the power transmission auctions, Brazil’s National Electric Energy Agency (ANEEL) conducted an auction in April 2016 where 35 projects were offered involving 7,068 km of transmission lines and 13,132 MVA of transformation capacity. Except for four projects, all were taken up. The construction period for these projects will vary from 36 to 60 months, and the concession period will be for 30 years. The auction attracted a total investment of B$12.7 billion, which amounts to around $4 billion (1 B$ or 1 Brazilian Real is approximately equal to $0.32)
Two projects that were awarded to Sterlite Power are located in the states of Rio Grande do Sul and Pernambuco. The two projects, with a concession period of 30 years each, are expected to see investment of Rs.1,350 crore. Sterlite also recently announced that it had inducted two senior key personnel to head the Brazilian power transmission ventures. Reliable reports also indicate that Sterlite Power has initiated dialogue with global power transmission EPC players like GE, Agnevix and Spain-headquartered Incomisa to partner the Brazilian ventures.
According to information available from Brazil energy regulatory ANEEL, Sterlite Power will develop two transmission schemes – one each in the states of Rio Grande do Sul and Pernambuco. In Rio Grande do Sul, Sterlite will mainly develop three 230kV transmission lines aggregating 114.4 km and two 230/69kV substations, located at Vinhedos and Lajeado. The Pernambuco project involves mainly two 230kV transmission lines covering around 140km and two 230/69kV substations.
Brazil, due to its topography and vast geographical area, faces challenges in land-centric projects such as power transmission. It is interesting to note that Indian companies are already active in Brazil, in the form of EPC contractors. T&D India interacted with KEC International Ltd, a prominent EPC contractor with extensive presence in Brazil. According to Vimal Kejriwal, MD & CEO, KEC International, the varied topography of Brazil creates different challenges as one moves from one region to another within the large country. For instance, states like Minas Gerais have mountainous topography while others in north Brazil, though having flatter terrain, are inundated during monsoons. KEC International has completed seven power transmission projects in Brazil so far, while several others (including a 500kV line) are under execution, Kejriwal noted. It is worthwhile to note that KEC International owns SAE Towers (a steel tower manufacturing company) that has a manufacturing facility in Brazil.
India now completes the entire value chain in Brazil’s power transmission space—right from equipment manufacturing to EPC contracting and now to power transmission development.
China has planned major investments in Brazil’s power sector, including transmission.
It is expected that in the last quarter of 2017, Brazil will initiate another round of auction of power transmission lines, envisaging a total investment of $1.4 billion. Brazil has been awarding power transmission concessions since 1999 and has generally seen better investor response in recent years, both from local and foreign companies. China, incidentally, has major investments in Brazil’s power sector, including transmission. According to information available from the office of Consulate General of Brazil in Mumbai, Chinese companies have spent a total of $21 billion, since 2015, to acquire as many as 21 Brazilian electricity companies. The transactions include an arrangement earlier in 2017 in which the State Grid Corp of China bought majority stake in Brazil’s third-largest power company, CFPL Energia, for $4.5 billion. State Grid Corp of China already operates close to 10,000 km of power transmission lines throughout Brazil. The Shanghai Electric Corp, meanwhile, is considering acquiring Brazilian power company Eletrosul Centrais Elétricas SA for over $1 billion, it is learnt.
Photo Courtesy: Incomisa