The Brazilian subsidiary of French power company Engie emerged as the main winner at Brazil’s latest auction for the rights to build new transmission lines in the country.
Engie Brasil Energia has already sorted out financing for the required BRL2.9 million ($540 million) worth of investment under the deal, CEO Eduardo Sattamini told reporters on Friday, without elaborating.
The company will build 780 km of transmission lines in the south and south-east of the country and will receive an annual fee of BRL252 million after offering a 48% discount on the power regulator’s suggested fee.
“The company already has arranged pre-structured financing and firm proposals from suppliers and infrastructure companies that will be involved,” Sattamini said.
Itaú BBA’s equity analysts issued a mixed view on the transaction.
Sensitivity analyses for net present value and internal rate of return found unattractive returns for Engie in most scenarios, they said in a research note on Sunday. “We discussed with the company the rationale of the bid and potential value drivers, but they did not share any guidance or specific assumptions,” the analyst wrote.
STRATEGIC MATTERS
Engie’s latest investment is part of its strategy to rebalance its presence in the power sector. The company has invested massively in the Brazilian power generating sector in the past two decades — the activity accounts for 80% of its assets — and is now seeking to increase its activities in transmission.
“Thanks to this new asset, transmission will represent 25% or 30% in the future,” Sattamini said. “In the longer term, it may reach 40% or 50%, depending on opportunities,” he said during a press conference.