Equipment manufacturer Shanghai Electric is making a big move into Brazil after signing a preliminary non-binding agreement to take majority control of a series of power transmission projects to be developed in co-operation with Brazilian state-controlled utility Electrosul.

The deal will be done via Shanghai Electric Power Transmission and Distribution Engineering Co, which will itself create a special purpose vehicle to majority own and oversee the projects directly in co-operation with Eletrosul Centrais Elétricas SA. As negotiations progress, there is a possibility that Electrosul may take a 25% stake in the Special Purpose Company.

The total cost of the projects in Rio Grande do Sul, which are sub-lots within the Lot A concession, is estimated at 3.27 billion real (US$992 million). Lot A was one of the nineteen transmission area lots auctioned by the Brazilian Electricity Regulatory Agency back in 2008.

Electrosul parent company Electrobras announced the agreement in a stock exchange filing. Electrobras, which is 52% owned by the Brazilian government, is a public company with its shares traded on the BM&F Bovespa and New York Stock Exchange.

Rio Grande do Sul is the southernmost state in Brazil, bordering on Argentina and Uruguay. lts biggest city is Porto Alegre, with a population of 1.5 million.