China Nuclear Power Group (CGN) has acquired three solar and wind plants in Brazil from Italian power generation group Enel and in so doing steps up China's considerable footprint in Brazil's energy provision.
The deal was signed on 16 January between Enel subsidiary Enel Green Power Brasil Participacoes (EGP Brazil), and CGN Energy International Holdings Co (CGNEI).
The three facilities are the 292MW Nova Olinda solar plant in the north-eastern Brazilian state of Piaui, the 158MW Lapa solar plant in the north-eastern Brazilian state of Bahia, and the 90 MW Cristalandia wind farm, also in Bahia.
The move will no doubt be of considerable interest to newly-elected President Jair Bolsonaro, who assumed office on 1 January, and who has stated that he wants to continue bringing more private capital into infrastructure. It is also known that Chinese firms view Brazil as an entry point to build up their presence in the Latin American market.
The price tag for the three plants - all of which are already fully operational - is 2.9 billion real (US$783 million). The deal is expected to close in the first quarter.
All three plants have long-term power purchase agreements (PPAs) in place. Lapa and Nova Olinda are supported by 20-year supply contracts that provide for the sale of specified volumes of energy to the Brazilian Chamber of Commercialisation of Electric Energy (Camara de Comercializacao da Energia Eletrica or CCEE). Cristalandia is supported by 20-year PPAs with a pool of Brazilian electricity distribution companies.
In line with Enel's 2019-2021 strategic plan, the transaction aims to maximize and accelerate value creation by rotating assets to free up resources that can be invested in new projects. Enel will continue operation and maintenance activities on the assets sold.
Enel said in a statement that it viewed the Brazilian renewable market as rich in opportunities, and that it wanted to keep growing in the country, including by financing its new investments through the build, sell and operate (BSO) model. Last October Enel Green Power Brasil started construction of the 475MW Sao Goncalo solar park in Sao Goncalo do Gurgueia, in Piaui state. Sao Goncalo, which is expected to start operations in 2020, is the largest photovoltaic (PV) facility currently under construction in South America. The Enel Group will be investing around 1.4 billion real (US$378 million) during the construction of the facility.
"With the sale of these assets we are capturing value for further growth in Brazil, where we are implementing a large pipeline of renewable projects," says Antonio Cammisecra, head of Enel Green Power. "We remain focused on the opportunities offered by the Brazilian renewable market and we are continuing to invest in the country where Enel Green Power will play an active role by carrying out new projects and managing the fleet of operating plants."
Following this latest acquisition by CGN, there are likely to be more opportunities for Chinese companies to buy renewable assets once projects are up and running.
In addition to operating nuclear power plants such as Daya Bay and Ling Ao in Guangdong Province, CGN has a strategy of developing and investing in renewable energy sectors such as hydro, wind and solar.
For example, last December CGN announced that it has started developing the 500MW Shanwei Houhu Offshore Wind Farm and the 400MW Huizkou Gangkou Offshore Wind Farm Phase I. The two projects are the first of CGN's planned offshore wind power projects in eastern Guangdong Province.
China is the biggest foreign investor in the energy sector in Brazil. CPFL, the country's biggest power distribution company, is owned by China State Grid. And PowerChina subsidiary Shandong Electric Power Construction Corporation 1 is building an ultra-high voltage transmission line connecting hydro plants in the north to major cities in the south.