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State Grid Brazil Holding S.A: Acquiring assets and winning concessions to expand [free access]

November 10, 2015

State Grid Brazil Holding S.A. (SGBH) is a subsidiary of China’s largest electricity transmission and distribution utility, State Grid Corporation of China (SGCC), and has become the fourth largest transmission operator in Brazil with recent acquisitions in the country. It has assets covering heavy load centres in Brasilia, Sao Paulo and Rio de Janeiro.

 

SGBH was incorporated in 2010 following SGCC’s acquisition of a 99.99 per cent stake in seven Brazilian transmission companies from Plena Transmissora—a consortium of Spain-based companies Cobra, Elecnor, Isolux and Abengoa—for BRL3.1 billion. SGBH acquired five more Brazilian transmission companies in 2012. These companies were owned by Spain-based construction company, Actividades de Construccion & Servicios S.A. (ACS). These five companies—Porto Primavera Transmissora de Energia S.A., Iracema Transmissora de Energia S.A., Linhas de Transmissão do Itatim S.A., Araraquara Transmissora de Energia S.A. and Catexerê Transmissora de Energia S.A.—owned transmission assets in mid-west, southeast and north Brazil. In July 2015, SGBH bought two more transmission companies that were part of the ACS group, namely, Linha de Transmissão de Montes Claros S.A. (LTMC) and Atlântico Concessionária de Transmissão de Energia (ACTE).

 

SGBH is currently focusing on establishing itself as one of the major transmission system operators in Brazil. While it is looking at acquiring more assets, it is also partnering with local companies to set up power transmission projects in the country. The latter strategy should help it to deal with issues related to site selection, land acquisition, local policies, local manufactures, etc.

 

Existing Network

As of 2013, SGBH’s high voltage assets comprised 6,748 km of transmission lines, 12,803 MVA of transformer capacity and 34 substations at the 138 kV–500 kV level. These assets are owned and operated by the 12 transmission companies that SGBH acquired during 2010 and 2012.

 

A major part of its network assets are owned by the seven companies that it acquired from Plena Transmissora, covering 500 kV transmission lines totalling 3,173 km in the states of São Paulo, Minas Gerais, Mato Grosso and Goiás. These seven transmission companies are Poços de Caldas Transmissora de Energia Ltda., Ribeirão Preto Transmissora de Energia S.A., Serra Paracatu Transmissora de Energia S.A., Expansion Transmissão Itumbiara Marimbondo S.A., Expansion Transmissão de Energia Elétrica S.A., Serra da Mesa Transmissora de Energia S.A. and Itumbiara Transmissora de Energia Ltda.

 

The two companies (LTMC and ACTE) acquired by SGBH in July 2015 are yet to be incorporated into SGBH. LTMC is based in Minas Gerais and owns the 151-km-long 345 kV Pirapora 2–Montes Claros 2 line, the 500/345 kV Itabirito 2 substation with 560 MVA transformer capacity, and the 345/138 kV Padre Fialho substation with 150 MVA transformer capacity. ACTE is based in the state of Pará and owns a 79-km-long 230 kV line connecting the Integradora substation to Xinguara substation.

 

Table 1: SGBH’s transmission network

Network

2013

Transmission line length (km)

6,748

Transformer capacity (MVA)

12,803

Number of substations

34

Source: SGBH

 

Operational performance

In 2014, the 12 transmission concessionaires of SGBH earned about BRL826.9 million in income from operations. Among these, Itumbiara Transmissora de Energia Ltda recorded the highest revenue of BRL158.4 million followed by Expansion Transmissão de Energia Elétrica S.A. with a total revenue of BRL130.3 million and Serra da Mesa Transmissora de Energia S.A., which earned a revenue of BRL103.3 million.

 

During 2013 and 2014, Araraquara Transmissora de Energia S.A. saw the highest increase in total income, which grew by 25.17 per cent from BRL29 million in 2013 to BRL36.3 in 2014. The company’s net profit in 2014 also marked a significant increase of 92.9 per cent over the profits reported in the previous year. The largest decrease in total income for 2014 was registered by Serra da Mesa Transmissora de Energia S.A. The company’s income from operations was BRL103.3 million in 2014, about 9.3 per cent less than the 2013 figure.

 

Table 2: Key financial indicators of SGBH’s companies (BRL million)

Concessionaire 

Income from operations 

Cost of operations 

Net profit1 

2012 

2013 

2014 

2012 

2013 

2014 

2012 

2013 

2014 

Araraquara Transmissora de Energia S.A.

103.8

29

36.3

86

6.4

4.8

-41.9

9

17.4

Catxerê Transmissora de Energia S.A.

154.7

63.2

68.5

88.7

8.7

2.2

-73.9

25.5

42.5

Expansion Transmissão de Energia Elétrica S.A.

136.3

130.5

130.3

8.3

7.4

7.3

71.8

56.1

61.6

Expansion Transmissão Itumbiara Marimbondo S.A.

59.5

57.9

59.6

4.7

4.5

4.4

29

21.1

28.6

Iracema Transmissora de Energia S.A.

23.5

23.4

23.2

18.2

2.8

8.8

-148.2

3.8

0.9

Itumbiara Transmissora de Energia Ltda

156.7

151.8

158.4

12.7

18.2

29.2

66.8

29.7

47.1

Linhas de Transmissão do Itatim S.A.

113.3

80.8

100.5

41.5

4.5

2.9

123.8

34.7

52

Poços de Caldas Transmissora de Energia Ltda

30.7

30.2

32.6

6.4

7.3

6.1

7.1

-13.6

-20.8

Porto Primavera Transmissora de Energia S.A.

103.8

69.8

63.9

13

7.3

8.1

61.1

34.4

29.3

Ribeirão Preto Transmissora de Energia S.A.

NA

23.2

24.3

 NA

7.5

8.2

 NA

-15.8

-8.9

Serra da Mesa Transmissora de Energia S.A.

132

113.9

103.3

31.7

21

14.8

45.7

-1.6

18.1

Serra Paracatu Transmissora de Energia S.A.

27.1

19.6

26

3.9

5.8

38

7.5

-10

-35

Note: 1–Net profit is calculated after deducting other expenses, administration cost, personnel cost, financial expenses, taxes and depreciation from gross operating profit; NA–not available

Source: SGBH

 

Future plans and Investments

SGBH has won six transmission concessions entailing the construction of over 6,054 km of high voltage lines in Brazil. All the projects are slated for completion between 2015 and 2019.

 

In 2012, SGBH, in consortium with power utility Companhia Paranaense de Energia (Copel), won two transmission concessions associated with the Teles Pires hydroelectric power complex in the Amazon Basin. Under the two concessions, the SGBH-Copel consortium will construct 1,600 km of transmission lines in the states of Mato Grosso, Goiás and Minas Gerais to link the country's industrial area located in the southeast region to the Teles Pires river basin in the Amazon.

 

Also in 2012, SGBH, in consortium with Copel G&T and Furnas Central Electric S.A. (Furnas), won a transmission concession for the construction of three 500 kV lines spanning 967 km. These lines will reinforce the grid network, which will increase the transmission of energy from the north and northeast to the southeast with the start up of the Belo Monte plant.

 

SGBH, in consortium with Furnas and Centrais Elétricas do Norte do Brasil S.A. (Eletronorte), won the bid to develop the transmission system associated with the 11.2 GW Belo Monte power complex located on the Xingu River in the northern state of Pará in 2014. To evacuate power from the hydropower complex, a 2,140-km-long, ±800 kV high voltage direct current (HVDC) line from the Xingu substation to the Estreito substation in Minas Gerais state will be constructed. The project also includes the construction of the 500 kV/±800 kV Xingu and Estreito substations.

 

SGBH is also constructing the 230 kV Niquelândia substation and the 500 kV Luziânia substation in consortium with Furnas. As per the concession contract, the substations were slated for completion in 2014, but are now likely to be completed in 2015.

 

The only project that SGBH is developing independently is the 440 kV Marechal Rondon substation, for which it won the concession contract in 2014.

 

Table 3: Key upcoming transmission projects of SGBH

Concessionaire

Shareholding pattern

Route

Voltage level

Line length (km)/ transformer capacity (MVA)

Expected completion

Marechal Rondon
Transmissora de
Energia S.A
(Marechal Rondon)

SGBH (100 per cent)

Marechal Rondon substation

440/138 kV

600 MVA

2016

Guaraciaba

Copel G&T (49 per cent) and SGBH (51 per cent)

Ribeirãozinho–Rio Verde Norte line

500 kV

250 km

2015

Transmissora de Energia S.A (TP Sul)

SGBH (51 per cent)

Rio Verde Norte–Marimbondo II line

500 kV

350 km

 

Marimbondo II substation

500 kV

 

 

Seccionamento das Marimbondo–Araraquara C1 and C2 line

500 kV

6 km

 

Matrinchã
Transmissora de
Energia S.A (TP
Norte)

Copel G&T (49 per cent) and SGBH (51 per cent)

Paranaíta substation

500 kV


2015

Paranaíta–Cláudia line

500 kV

300 km

Cláudia substation

500 kV

 

Cláudia– Paranatinga line

500 kV

350 km

Paranatinga substation

500 kV

 

Paranatinga–Ribeirãozinho line

500 kV

355 km

Luziânia-
Niquelândia
Transmissora S.A
(Luziânia—
Niquelândia)

Furnas (49 per cent) and SGBH (51 per cent)

Niquelândia substation

230 kV

30 MVA

20151

Luziânia substation

500 kV

225 MVA

Paranaíba Transmissora de Energia S.A

Copel G&T (24.5 per cent); SGBH (51 per cent) Furnas (24.5 per cent)

Barreiras II—Rio das Éguas line

500 kV

224 km

2016

Rio das Éguas—Luziânia line

500 kV

373 km

Luziânia—Pirapora II line

500 kV

350 km

Belo Monte Transmissora de Energia Spe S.A

SGBH (51 per cent); Furnas (24.5 per cent); Eletronorte (24.5 per cent)

Xingu substation

500 kV substation with ±800 AC/DC convertor station

4,000 MW

2019

Estreito substation

500 kV substation with ±800 AC/DC convertor station

3,850 MW

 Xingu–Estreito line

±800 kV

2,092 km

Note: 1–The project was required to be completed in 2014 as the concession contract was signed in May 2012.

SGBH – State Grid Brazil Holding S.A.; Copel G&T – Companhia Paranaense de Energia (Copel) Geração e Transmissão S.A.; Furnas – Furnas Central Electric SA; Eletronorte – Centrais Elétricas do Norte do Brasil S.A.; AC – alternating current; DC – direct current

Source: Agencia Nacional de Energia Eletrica (ANEEL)

 

Outlook

Brazil’s commitment to developing large transmission projects offers significant opportunities for investment in the sector. SGBH’s strategy to partner with incumbent players to win and develop new projects should provide it with the understanding of how best to deal with and resolve local issues.