ENERGO - PRO a.s. (“ENERGO-PRO” or “company”), the largest Czech investor in the hydropower sector, has agreed to acquire seven small hydropower plants in Brazil from investment vehicles managed by Brookfield Asset Management. The total installed capacity of these plants reaches 90 MW. The transaction is subject to customary regulatory approvals and is expected to close in 2024.
With this acquisition, ENERGO-PRO further diversifies its foreign portfolio. Brazil is the fifth foreign market of ENERGO-PRO’s presence. The company operates in Bulgaria, Georgia, Türkiye and Spain. Brazil is the first country in Latin America where ENERGO-PRO will focus on its core business – the operation of hydropower plants. The company is also present in Colombia – the hydropower plant Chorreritas is under construction, and it is expected to start operation in 2026.
Brazil is a leading hydropower market with a total installed capacity surpassing 100 GW. "We are entering into a country with a large economy and long history of hydropower through the acquisition of and high-quality portfolio backed by long-term contracts for the sale of electricity generated. In previous years, these plants have achieved an annual power generation above 400 GWh," said ENERGO-PRO Group’s Chief Executive Petr Milev.
ENERGO-PRO places great emphasis on geographic and hydrological diversification of its portfolio. "This gives us resilience to various crises, political or economic situation in certain countries or regions. With a balanced portfolio of hydropower plants on a global scale, we are not threatened by, for example, a momentary lack of rainfall in some of our locations," emphasised Petr Milev. Brazil's rivers are generally characterised by lower gradients and high-water flows.
With the Brazilian acquisition, ENERGO-PRO significantly strengthens its activities in Latin America, which is becoming another of its geographical pillars together with the Black Sea region and Western Europe.
HYDROPOWER PLANTS WITH WATER RESERVOIRS
The seven small hydropower plants that are heading to be part of the ENERGO-PRO’s Brazilian portfolio are located on the rivers Lambari, Pomba, Grande and Verde. The smallest of these plants, Cristina, has an installed capacity of 3.8 MW, while the biggest, Verde 4A, has an installed capacity of 28 MW. "All of these hydropower plants have water reservoirs which allows flexible management of their operation," said Petr Milev. The hydropower plants were commissioned in the last decade; thus the assets are relatively new and well-maintained.
In contrast to Türkiye or Colombia, where ENERGO-PRO built or is building new hydropower plants, the strategy for Brazil is focused on the acquisition of operating hydropower assets. These can be run-of-river hydropower plants without reservoirs or sources with smaller reservoirs as in the case of the portfolio now being purchased.
FINANCIAL STABILITY
The long-term licences of most of acquired hydropower plants are valid for an average of 24 years and can be renewed subsequently. The power plants, which account for 60% of the total capacity of the portfolio, have contracts for guaranteed power purchase prices which are annually adjusted by local inflation. This allows the operator to mitigate the risk of exchange rate fluctuations. Another advantage, according to Peter Milev, is the low level of existing debt.
Part of the financing of the Brazilian acquisition will be done by issuing the so-called green bonds which are dedicated to renewable energy. ENERGO-PRO is acquiring 100% or controlling stakes of the relevant companies. The transaction is expected to be closed throughout the 4th quarter of 2024 following customary regulatory approvals.
ENERGO-PRO was advised by XP Finanças Assessoria Financeira (financial advisor) and Machado, Meyer, Sendacz e Opice Advogados (legal advisor).
