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Brazil prepares closely watched transmission auction

15 Mar 2017, 3.07 pm GMT

Brazil prepares closely watched transmission auction

Sao Paulo, 15 March (Argus) — Brazil will launch its first transmission line auction of 2017 next month, with an ambitious portfolio of 35 projects requiring total estimated investment of R13.3bn ($4.2bn).

Electricity regulator Aneel will offer 7,400km (4,598mi) of transmission lines and 36 substations spanning 20 states in the 24 April auction.

Of the 35 projects, 18 were already offered in previous auctions but failed to attract any bids. An additional eight projects were sold in previous auctions, but because the winning bidders did not meet the concession terms, they were cancelled and are being re-auctioned.

Winners will have 36-60 months to conclude construction.

The transmission projects are critical to opening supply bottlenecks in Brazil, and interest in the auction is expected to be robust, with large foreign firms such as Engie and EDP already stating publicly their intentions to participate.

The auction has taken on added significance after the government suspended a power generation auction that had been scheduled to take place in December 2016 because of limited market interest.

The government has announced some improvements in the transmission auction terms since the previous auction in October 2016, including higher rates of return, and more precise cost analyses, such as potential environmental issues and land costs.

Local companies have also expressed interest in the auction. Transmission firm Taesa said in a conference call that it plans to have a "strong presence" in the auction and has already earmarked R2bn for projects included in the tender offer.

Similarly, Equatorial Energia said it is studying the offerings. The company debuted in the transmission sector last year, winning seven of the 21 lots sold in the last auction.

Both Equatorial and Taesa expect vigorous competition, following the improvements in the terms.

It is unclear whether large transmission firms such as China's State Grid will participate because most of the projects are relatively small, with the largest spanning just under 600km.

On the other hand, the more modest portfolio could attract smaller companies and investment funds.

Aneel has maintained a decision to block state-run Eletrobras subsidiaries Furnas, Chesf and Eletronorte from participating in the auction because they have transmission projects that are more than 36 months behind schedule.

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