Iberdrola prepares $1.3bn investment in Brazil for 2016

The Spanish group Iberdrola, one of the three largest European power companies and one of the controlling shareholders of Brazil's Neoenergia, with a 39% stake, plans to invest $1.3 billion in Brazil in 2016. The amount is part of the company’s $4 billion investment plan for the country in the next three years.

The funds are intended primarily to the construction of hydroelectric plants, including Belo Monte, on the Xingu River (Pará), in which Neoenergia has a 10% share, and seven wind farms. Another part of the investment is also aimed at improving the service quality and expanding the network of its four distributors: Cosern (Rio Grande do Norte), Celpe (Pernambuco) and Coelba (Bahia), controlled by Neoenergia; and Elektro (São Paulo/Mato Grosso do Sul), which is 100% owned by Iberdrola.

Iberdrola CEO Ignacio Galán presented the plan during meetings on Tuesday with President Dilma Rousseff and ministers Eduardo Braga (Mines and Energy) and Joaquim Levy (Finance) in Brasília. In the meetings, the executive also expressed support for the tariff realism and the fiscal adjustment.

"Our main reason [for the meetings] was to express our position in Brazil at this moment and show our confidence in the country and its future. I believe that Brazil, like many other countries, goes through good times and bad times. We have been in Brazil for over 18 years and already faced situations of all kinds. In early 2000s, there was a drought situation as today," Mr. Galán said in an interview with Valor.

"In these 18 years, we have invested $16 billion in the country, in companies that we have stakes. And right now we have works and investments of $4 billion. We’ve participated in Belo Monte, in Baixo Iguaçu [dam under construction in Paraná]. And we will continue investing in this country,” he added.

Brazil is the top country of Iberdrola’s portfolio in Latin America, the third largest destination of the company’s investments today, behind only the UK and the US. Globally, the Spanish group has a 45,000 megawatts of generating capacity — equivalent to just over a third of the Brazilian system — and supplies power to more than 100 million people. In 2014, the company invested €2.8 billion globally.

From Ms. Rousseff, Mr. Galán said he had received support and recognition for the work the company is doing in the country. He said the president and the ministers recognize that Iberdrola is a stable power company that complies with its commitments.

Tuesday morning, the executive met with the presidents of Neoenergia, Solange Ribeiro, and of Elektro, Marcio Fernandes. Before leaving for the US at night, the executive scheduled a meeting with Gueitiro Genso, president of Banco do Brasil pension fund Previ, which is also a shareholder of Neoenergia, with a 49% share. It’s going to be the first time Mr. Galán meets Mr. Genso, who took the helmet in February. The other partner of Neoenergia is state bank Banco do Brasil, with the remaining 11.99%.

Mr. Galán also said the company is studying its participation in the next reserve power auction, focused on projects of solar power generation and scheduled for August 28.

Asked about his interest in acquiring Goiás-based distributor Celg-D, put up for sale by state-run holding company Eletrobras (which owns 51%) and the government of Goiás (with 49%), Mr. Galán said he was not familiar with the deal. He recalled, however, that in 2011 the company acquired 100% of Elektro. At the time, Iberdrola was not among the main market’s bets to buy the company.

Mr. Galán also pointed out that Termopernambuco, a gas-fired plant run by Neoenergia, located in the port complex of Suape, in Ipojuca (Pernambuco), is expected to resume operation in less than a month. The plant had its operation shut down due to a problem in the rotor. Conventional repair would take about six months. So Iberdrola has decided to seek a rotor available in a unit of the group in Mexico. The piece, of 46 tonnes, arrived in Brazil last Monday, carried by an Antonov plane.

"This shows our situation in the country. The case of the rotor shows that we will do everything necessary to move forward in Brazil," the executive said.

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