Brazil's CPFL to Expand, Reorganize Wind Energy Business after Signing $600 Million Deal

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Researched by Industrial Info Resources Latin America (Cordoba, Argentina)--Earlier this month, Brazilian group Companhia Paulista de Força e Luz (NYSE:CPL) (CPFL Energia) (Campinas, Brazil) announced that it had acquired all of Siif Énergies do Brasil ltda. (Fortaleza, Brazil), the company with the largest wind portfolio in the country. This transaction represents an initial value of about $606.25 million and includes both Siif's operational plants and planned projects, with the exception of a 135-megawatt (MW) project, whose definitive purchase will have to be confirmed later on.

The four windfarms in operation are Praia Formosa (105 MW), Icaraizinho (55 MW), Paracuru (23 MW), and Foz do Rio Choró (25 MW), which make up a combined operational installed capacity of 208 MW. All these windfarms are in the northeastern state of Ceará and began operations between 2008 and 2009.

CPFL also bought Siif's wind project portfolio that accounts for a total planned installed capacity of 732 MW, out of which 412 MW are eligible for participation at the government-sponsored wind energy auctions, which are usually held twice a year. CPFL may decide after the initial transaction to buy the 135-MW Quintanilha Machado winfarm project, in which case the combined enterprise value of the purchase would rise to about $998 million. This last project has been on hold for several years due to permitting issues, but it is expected it will begin to move on after the national energy regulatory agency ANEEL recently authorized its relocation within the state of Rio de Janeiro.

Wind projects will come to enlarge CPFL's exisiting portfolio include seven windfarms under construction, with a combined capacity of 188 MW, that must begin commercial operation in July next year; an engineered 30-MW windfarm with a startup date in July 2013; and another five windfarms with a combined capacity of 150 MW that are planned to be brought online in July 2013, subject to completion of the permitting phase, and that should be made part of the Brazilian Free Energy Market.

At present and considering all projects with startup dates no later than 2013, wind-based energy represents 12.48% of CPFL's power generation capacity of about 2,949 MW. According to CPFL, Siif's acquisition will increase the group's wind power generation by 942 MW, meaning a total of 1,310 MW will come from this source. CPFL also owns hydro, small hydro, and biomass power plants.

Last week, CPFL reinforced its strategic move on the renewable energy sector by announcing it had purchased local Empresa de Investimento em Energias Renováveis S.A. (ERSA) (São Paulo, Brazil). To accomplish this, CPFL detached of two of its business units and merged them with ERSA to form the new CPFL Energias Renováveis. The capital integration of the new company will be divided 63.6% for CPFL and the remaining 34.4% to ERSA. It is expected that the newly created venture start to do business on its own from August this year, after receiving approval from Brazil's energy regulatory agency ANEEL. After that, its constituent companies will cease to exist.

ERSA in an independent power producer that has promoted and implemented small- to medium-sized generation projects that are powered either by hydro, wind or biomass sources. ERSA's generation assets include the 24-MW Barra da Paciência Small Hydro Power Station, which began operations last month. Its project portfolio comprises a 78-MW windfarm complex in João Câmara, in the state of Rio Grande do Norte, and the 48-MW Bom Retiro Hydro Power Plant in Ponte Nova, in the state of Minas Gerais. These two projects are scheduled to begin construction in third-quarter 2011 and in 2013, respectively.

It is expected that wind-based installed capacity in Brazil will increase nearly 3,000 MW bewteen April 2011 and the end of 2013, because several projects that were auctioned last year will begin operations. This will imply a 230% growth from the current 900 installed megawatts of wind power.

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