Impact and Value During and After Construction - Tiago de Barros Correia, Brazil

Tiago de Barros Correia

Director

February 29, 2016

Paris, France

Impact and Value During and

After Construction

2 2

Topics Brazilian tidbits and Brazilian Power Sector

overview

About us

Brazilian strategy to develop key infrastructure projects

Impact and value

3 3

Total area 8,515 million km2 (83% of Europe)

Total Population – 2015 205 million inhabitants (27% of Europe)

Overall GDP – 2014 U$1,715 billion

Installed capacity 141,631 MW

Peak load 84,958 MW (Feb 2014)

Electricity Consumption per Capita 2,664.15 kWh

Average Energy Consumption Growth Annual Rate 4%

BRASIL SUMMARY

Electricity Supply Mix

80% of the electricity supply mix is renewable

4,441 plants in operation with a total 141 GW of

installed capacity

834 new projects granted, increasing the capacity by

27% (39 GW) by 2021

Fossil Fuel 19%

Nuclear 1%

Biomass 9%

Hydro 65%

Wind 6%

Solar 0%

Transmission Grid

230kV ac 345kV ac 440kV ac 500kV ac 700kV ac 600kV cc 800kV cc

125,644 km of transmission lines

Expansion of 10,400 km until 2019 (8%)

Auctioning of R$ 30 billion of new Investments only in

2016

If our Transmission Grid Were in Europe...

6

7 7


overview

About us


Impact and value

ANEEL Board of Directors Open Sessions

› Decisions are made by the Board of Directors (5) › Board sessions are open to the public participation and is

transmitted live over the web › Cases are distributed to each Director by lottery › Case settling relies on technical and legal analyses

9 9


overview

About us


Impact and value

10 10

Infrastructure governance cycle 1. Evaluation of infrastructure

needs

2. Decision and prioritization

3. Project preparation

4. Auctioning

5. Executive project and licensing

6. Construction operation and maintenance

11 11


overview

About us


Impact and value

12 12

Value for Money “How much is too much?”

Economics Efficiency

Can we get equivalent infrastructure for less

money?

Can we get the same results while saving money and

time depending on how we manage the process?

Would savings regarding the economics and efficiency of the Project risk its effectiveness and sustainability?

13 13

Sustainability trail

Goal

GHG emissions

Renewable sources

Distributed generation

Power losses

Pathway (Long Term Plan)

Resources and technology availability

Budget constraints

Regulation

Subsidies

Strategic Projects

Externalities (Global and Local)

Life Time Analysis

Environmental

Economic

Social

Jobs

Health

Mitigation and Compensation

Execution

Assurance of project commitments

Accountability

Secure stakeholders acceptance and approval

14 14

Learning by Doing

But we deal with uncertainty and sometimes we need to get back on trail and try harder

To do that we need stakeholders support

Again, accountability appears as a key concept

15 15

Impact and value – Transmission Good Economics

Since 1999 the Brazilian Government has been conducting auctions to contract transmission services from greenfield projects. The auctions procure long term contracts (30 years) and define the transmission services to be delivered and the construction time line.

Applicants need to meet certain criteria in order to be accepted for participation in the auctions. This design intends to ensure that the project offered will meet environmental, technical and economic requirements of quality .

Bidders with the lowest proposed prices are the winners.

16 16

1.0

7.7

0.8 2.2

3.5

6.1 5.0

3.0 1.7

13.9

4.5 2.5

7.0

10.5 10.2

13.3 13.3

30.6

0

5

10

15

20

25

30

35

Investment in Billions of (R$) Concessions Granted and Expected till the end of 2016* - present

value (*assumes all contracts signed)

17 17

Impact and value – Transmission Low Efficiency

% of projects with delays for each required

phase.

With delay Early start In time Unknown

18 18

8/28/2013 - Last Major Disturbance taken place in the Interconnected Grid.

Load Loss: ~11GW Cut off Consummers : 17.5 million Fault Clearance Time: 4 hours Cause: Fire

Impact and value – Transmission Good Effectiveness

Availability of transmission lines in the last 5 years (%)

Load Restoration in the Northeast

19 19

Scope General goals Governance arrangement Budget (funding and

finance)

Public Policy

Major Risks Unrealistic goals Bad governance Insufficient resources

Risk-Bearing Government Society

Scope Strategic Projects Pricing and Timing Previous License Stakeholders support

Planning

Major Risks Social and Environmental

feasibility Stakeholders support

(not in my backyard!)

Risk-Bearing Government Society

20 20

Scope Contract design Auction design

Auctioning

Major Risks Collusion Bidless Auctions Winner’s Curse

Risk-Bearing Government Society Winner (Entrepreneur)

Scope Executive Project Final Licenses Construction Project Compliance

Construction

Major Risks Licensing delay Exchange rate Capital cost Bad Project New Environmental

Agency requirements (studies and mitigation measures)

Weather

Risk-Bearing Government Society Entrepreneur

21 21

Scope Power Capacity Energy Generation Transmissions Services

Operation

Major Risks Inflation Non concatenation

(generation and transmission)

Blackout (bad planning) Bad performance Market exposure

Risk-Bearing Consumer Entrepreneur

22 22

SGAN – Quadra 603 Módulos “I” e “J” CEP: 70.830-110 /Brasília – DF Tel.: 55 (61) 2192-8604

[email protected]

Thank you!

Impact and Value During and After Construction - Tiago de Barros Correia, Brazil

Government & Nonprofit