Ana Karina de Souza and Tasso Mielniczenko Penteado de Aguiar of Machado, Meyer, Sendacz e Opice Advogados discuss the forthcoming auctions in Brazil’s burgeoning wind power sector.
 
Brazil’s Ministry of Mines and Energy has announced that the first auction for concessions to sell back-up supply wind power will take place in November.
 
The announcement has been met with optimism from some quarters of the power sector, which see the auction as an opportunity to stimulate Brazil’s wind power market and attract foreign investment.
 
Some players have already announced businesses plans based on or related to the auction.
 
MME, for example, has announced plans for a twenty-year power purchase agreement.
 
The agreement will be subdivided into four-year periods with the level of power generated compared to that required by the contract reassessed every term. Under MME’s proposal the ratio could not be adjusted during the first four years.
 
Parties wishing to enter the auction will have to give an assurance that the aerogenerators to be installed are brand new, as well as giving details of its wind measuring track record on an hourly basis over at least the past 12 months.
 
The regulatory body in charge of the auctions, Empresa Produtora de Energia, says the requirement for new generation equipment has been proposed to avoid the re-use of equipment from countries that are replacing their equipment with more modern apparatus.
 
Its requirement that bidders submit details of their wind-measuring track record, however, may be considered an obstacle to recent entrants to the wind power business.
 
Companies which are successful in the auctions will be able to apply for credits under the Clean Development Mechanism (CDM) which is likely to make the process attractive to foreign investors, especially those from Europe.
 
Parties wishing to apply for credits must register with and submit documents to CDM’s executive board.
 
The Ministry of Mines and Energy has announced that, alongside the auctions, it will make public call for transmission facilities associated with or serving more than one of the wind power projects.
 
The expectation is that this will reduce costs associated with the construction and operation of facilities to connect the project to the Brazilian power grid by spreading those costs between several projects, and should therefore provide an additional incentive to prospective bidders.
 
The next step, scheduled for completion by the end of May, will be the registration of power plants willing to participate in the auction, including a preliminary analysis of their grid connections.
 
The publication of the bid notice with further detailed rules on the power auction and the draft power purchase agreement are still pending.
 
The 2009 wind power auction shows a renewed interest by the Brazilian government in boosting the development of the country’s wind power business, its first since the launch of the PROINFA program off PPA’s through Eletrobas in 2002.
 
(Latin Lawyer 14.05.2009)
 
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