Brazil’s transmission capital expenditure expected to increase significantly in 2022

RIO DE JANEIRO, BRAZIL – The Ministry of Mines and Energy (MME) estimates that the two transmission auctions scheduled for June and December this year will attract investments of R$11 billion (US$1.98 billion), 160% more than in 2021.

Projected capital spending is also 35% higher than in 2020 and represents a 124% jump over the 2019 figure, according to data from the sector regulator, ANEEL.

“We have good expectations for investments in transmission projects in 2022,” KPMG consulting partner Franceli Jodas said.

Jodas attributes her positive outlook to several factors:

• The potential to consolidate assets, as there are attractive opportunities to invest in in-service and brownfield infrastructure.
• A large number of projects in the June auction.
• An appreciating U.S. dollar against the Brazilian real, which maintains the attractiveness of assets in Brazil.
• Growing demand for transmission, considering the high number of new renewable projects in the country’s portfolio.
• Stable sector regulation for signed contracts.

The first auction, in June, will offer a total of 4,810km of transmission lines and 6,030MVA of transformer capacity to be installed. It should generate some R$8 billion in investments.

The largest works will be to reinforce transmission capacity in northern Minas Gerais state, where 3,543km of lines and 3,750MVA of substation capacity are planned with investments of around R$6 billion.

The auction may also include transmission projects with concession contracts in the process of expiring in the states of Amazonas, Pará, Rondônia, Mato Grosso do Sul and Santa Catarina. These total 94km of lines, 1,030MVA of capacity and approximately R$1.2 billion in capital expenditure.

One of the auction highlights is the project to improve energy security in the state of Amapá with an investment of close to R$200 million in the construction of 250km of lines.

The project also includes works to expand and reinforce the electricity service in São Paulo, Pará, Sergipe and Acre, including an increase of 1,250MVA of substation capacity.

The MME has not yet released details of the second auction. Among the potential projects are lines that will bring generation from new wind farms in the northeastern region, including a bipolar direct current line between Graça Aranha, in the state of Maranhão, and Silvânia, in Goiás.

According to Brazilian data shared by KPMG, Equatorial Energia, State Grid and Taesa had the largest transmission market shares by annual allowed revenue and construction-stage investment commitments in the 2020-2021 period.