Auction of 29 hydroelectric power plants is approved by the Brazilian Accounting Court

The auction of 29 hydroelectric power plants whose concessions expired was approved on October 14, 2015 by the full bench of the Brazilian Accounting Court.

The auction destined to acquire concessions of hydroelectric power plants under the system of allocating power and physical guarantee shares (auction # 12/2015-Aneel) will be divided into five parts, each of which composed of 1-18 hydroelectric power plants. Among the hydroelectric power plants, there are the following ones: Três Marias (operated by Minas Gerais electricity utility CEMIG, officially known as Companhia Energética de Minas Gerais), Governador Parigot de Souza (operated by Paraná electricity utility COPEL, officially known as Companhia Paranaense de Energia), and Ilha Solteira e Três Irmãos (operated by São Paulo electricity utility CESP, officially known as Companhia Energética de São Paulo).

The auction was only pending to be approved by the Brazilian Accounting Court. It will offer the grant of concession of the hydroelectric power plants upon engaging electric power generation services for the smallest amount on the total cost of the generation asset management (GAG) and on the grant bonus return (RBO), is scheduled for November 06, 2015 and may provide the Brazilian Government with a collection of R$ 17 billion.

Although electricity utilities, such as CESP, CEMIG, CELESC, FURNAS and ELETROBRAS, had already expressed their interest, other domestic and foreign power companies (such as CPFL, Energisa, ENEL, Brookfield, Three Gorges and Gas Natural Fenosa*) also turned their attention to the auction.

However, only expressing interest is not enough. In order to participate in the auction, it will be required to prove that at least one hydroelectric power plant is being commercially operated for a period of time no less than 5 years, and to offer the smallest amount on the total GAG and RBO costs, which will correspond to the global price to render the electric power generation services in BRL per year.

Thus, despite the fact that the auction is calling attention and arousing a lot of interest, the market is already reticent because raising funds enough to pay the highest concession grant bonus will not be an easy task in the current Brazil’s moment.

*Information given by the Brazilian Electricity Regulatory Agency (Aneel)

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