Brazil’s auction sells 110 % of domestic power demand for 2012

Oct 16, 2007 02:00 AM

Brazil's October 16 power auction for delivery in 2012 sold 110 % of the country's energy demand for that year, federal energy planning company EPE said. Power sold in the auction reached 51.2 bn reais ($ 28.3 bn), Brazil's trading board (CCEE) said. Traded volume was 4.35 GW of total installed capacity and 2.31 average GW, EPE said.
"[The auction result] means all the domestic power market is contracted five years in advance," EPE said.

The average price in the auction was 128 reais/ MWh. The average for hydro was 129 reais/ MWh, above the 126 reais/ MWh initial price, while thermo's average was 128 reais/ MWh, below the 140 reais/ MWh initial price, CCEE said. Hydro and thermo projects sold in 30 and 15-year contracts, respectively.
"The auction was successful because it made room for very cheap and interesting prices for the development of this market. Thermo power is becoming cheaper and cheaper at every auction we hold," CCEE president Antonio Carlos Fraga Machado said.

"The auction had 52 bidding rounds, which has certainly helped decrease the power price at the end of the process," acting mines and energy minister Nelson Hubner said.
Some however were not upbeat about the auction's relatively low prices.
"The outcome was negative, since the price paid for energy was below our expectations, once again with downward pressure from coal-fired thermo plants," Monica Araujo, market analyst for Sao Paulo-based Ativa Corretora, said in a report to investors. "This signals investments in thermo generation may not have a return as attractive as the market expects," she said.

Highlights
The 855 MW Foz do Chapeco and 1,057 MW Estreito hydro plants sold 259 and 256 average MW in the auction respectively. Hydro projects sold 715 MW average in the auction. The result was a boost for Estreito, said Mauricio Baehr, president of Suez Energy Brazil, which owns 40 % of the plant.
"The installation license was issued in December 2006 and Estreito construction started a month later. The next step is to complete the financing operation with [Brazil's federal development bank] BNDES," Baehr said, adding that negotiations for a financing agreement are underway.

Thermo plants sold 1.60 average GW in the auction.
Highlights were the 720 MW MPX plant in Ceara state and the 775 MW Santa Cruz thermo project, selling 615 and 351 average MW in the auction respectively.

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