CPPIB-backed Brazilian JV to grow through renewable power buys: Reuters

A joint venture formalized last week by one of Brazil’s largest conglomerates and a Canadian retirement fund plans to become a major renewable power generator in Brazil, mostly through acquisitions.

Brazil’s Votorantim Energia, controlled by privately-held Votorantim SA, and Canada Pension Plan Investment Board (CPPIB) last week closed a deal to form a 50-50 venture to invest in renewable energy in Brazil.

Among the opportunities the JV is looking at are subsidiaries that Brazil’s state-controlled power company Centrais Elétricas Brasileiras SA plans to sell, Votorantim Energia Chief Executive Fabio Zanfelice told Reuters on Monday.

“We have high ambition, and if you look at the size of the partners, we want to build a company of presence, of relevance in this market,” Zanfelice said.

The venture manages two large wind parks in northeastern Brazil with combined generation capacity of 565 megawatts. It is looking at expansion opportunities in a sector where there have been several deals as indebted local companies sell projects to new investors after Brazil’s deepest depression.

“Both partners have the desire and the capital to grow. We are not setting targets, we are looking for good deals that deliver good returns for shareholders,” he said.

The Votorantim conglomerate is already a large power generator in Brazil, with around 2.2 gigawatts of installed capacity. But it had until recently only focused on generating energy to supply its subsidiaries such as the Companhia Brasileira de Aluminio.

The decision to enter the broader Brazilian power market, building a portfolio of power plants to compete for long-term contracts in the regulated market, is recent.

Zanfelice said current political and financial instability in Brazil is not a deterrent for Canadian investment, adding that contracts in the country’s power sector are solid, with fixed returns. Both the wind parks under management have 20-year supply contracts.

The joint venture sees a future in Brazil for the so-called hybrid parks, which will combine in the same location wind, solar and, in the near future, storage capacity through batteries.

“Adding solar panels in the wind parks would complement production, and the batteries would stabilize the generation,” he said.

Update: CPPIB and Votorantim Energia announced the joint venture’s formation in late 2017 to acquire the two wind parks in northeastern Brazil.

(Reporting by Marcelo Teixeira; Editing by Susan Thomas)

(This story has been edited by Kirk Falconer, editor of PE Hub Canada)