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Auctions boom in the Brazilian energy market in the first semester of 2018

9Mar2018Mar9,2018
Infrastructure and Energy

On March 2, 2018, the National Electric Energy Agency (“ANEEL”) published the rules for Auction No. 1/2018 (A-4) to be held on April 4, 2018. The purpose of this auction is to trade energy from hydro, solar, wind and biomass-fueled power plants, which must commence supplying power on January 1, 2022.

Initial prices for the different projects are:

Hydro: R$ 291.00/MWh;
Wind: R$ 255.00/MWH;
Solar: R$ 312.00/MWh;
Biomass-Fueled power plants: R$ 329.00/MWh.

The new auction rules enacted by ANEEL clarified that all corporate restructuring (even those without change of control) undergone by sellers between enrollment for the auction and the issuance of the relevant power production license must be previously evaluated by ANEEL, otherwise the bidder could be disqualified and subject to applicable penalties. In addition, ANEEL maintained provisions used in auctions held in late 2017, such as: (i) restrictions on the participation of sellers which have been subject to the application of penalties of forfeiture or revocation of regulatory licenses or two or more penalties for delay of more than one year in respect of any construction milestone established in the relevant license; (ii) obligation to present a timeline demonstrating investments in the project and entering into project related agreements; and (iii) evidence of implementation of a similar power plant with at least 1/3 of the installed capacity of the winning bidder.
 
In addition to the A-4 Auction, the Ministry of Mines and Energy – MME has approved, pursuant to MME Ruling No. 44 of February 8, 2018, holding New Energy Auction A-6 in the second quarter of 2018. For now, no additional information has been provided in connection with such auction.

With respect to the privatization process relating to the Eletrobras Group, it is expected that: (i) the auction rules relating to the privatization of six of the group’s distribution companies (CEPISA, CEAL, Boa Vista, CERON, Amazonas and Eletroacre) shall be published this month; and (ii) the bid procedure shall be held between April and May, 2018, in accordance with PPI Resolution No. 20, of November 8, 2017. In order to clarify queries as to the privatization process, the distributing companies have recently held public hearings at their headquarters with potential investors and interested parties.

Lastly, on February 23, 2018, Eletrobras’ board of directors communicated its approval of the sale of its equity interest in seventy Specific Purpose Vehicles owned by its subsidiaries CHESF, FURNAS, ELETRONORTE and Eletrosul. Amongst the assets owned by the SPVs, are transmission facilities and wind power plants (see list of SPVs in Exhibit I). It is expected that the auction will be held on June 7, 2018.

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Exhibit I

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