China’s State Grid wins biggest Brazilian power line auction

Photo: José Luis Stephens/Shutterstock

On Friday, the Brazilian holding company of the Chinese giant State Grid won the largest lot in the country’s largest-ever auction of electricity transmission lines.

The company will invest BRL 18.1 billion (USD 3.6 billion) to build 1,513 kilometers of lines across the states of Maranhão, Tocantins, and Goiás, as well as substations. To this end, it accepted an estimated annual revenue of BRL 1.9 billion — a discount of 40 percent of the maximum amount stipulated by the electricity regulator Aneel. In a discount auction, the company that offers the lowest annual revenue wins.

State Grid will have six years to build the line, whose investment amount alone exceeds the total estimated investment of 54 of the 55 auctions held by Aneel in the past 26 years.

The project aims to increase the capacity of the interconnection between the Northeast and Central-West regions to transport surplus energy from Brazil’s Northeast, including from renewable sources such as wind and solar — the tender required high conversion capacity for lines and substations to transport energy from renewable plants, something that the Chinese company masters.

In 2010, State Grid Corporation of China chose Brazil for its first major investment outside of Asia, acquiring six power transmission companies in the country. Since then, it has built or participated in the construction of more than 16,000 kilometers of transmission lines in 13 states, representing an investment of BRL 28 billion. The company was involved in the controversial construction of the Belo Monte hydroelectric plant.

Along with two other lots offered this Friday on B3, the Aneel auction foresees BRL 21.7 billion in investments in transmission lines.

The Olympus XVI consortium, formed by Alupar and Mercury Investments, won the lot 2 for nearly BRL 240 million (USD 48.5 million) to build power lines between Silvânia in the state of Goiás and Ribeirão Preto, in São Paulo.

Celeo Redes Brasil won a dispute with the recently privatized Eletrobras and took lot 3 for BRL 101.2 million (USD 20.5 million) to connect structures between Minas Gerais and São Paulo, increasing regional interconnection energy export capacity in the North and Northeast.

An important aspect of this auction is that energy consumers will pay for the investments. In addition to up to six years to get the projects off the ground, the winning companies will have a 30-year concession to operate the structures, being paid for this through energy tariffs.

Fabiane Ziolla Menezes

Former editor-in-chief of LABS (Latin America Business Stories), Fabiane has more than 15 years of experience reporting on business, finance, innovation, and cities in Brazil. The latter recently took her back to the classroom and made her a Master in Urban Management from PUCPR. At TBR, she keeps an eye on economic policy, game-changing businesses, and people driving innovation in Latin America.