October 9, 2017 / 5:07 PM / 2 years ago

Exclusive: Votorantim in talks to form Brazil clean energy venture, sources say

SAO PAULO (Reuters) - Votorantim SA’s energy unit is in talks with global pension and sovereign wealth funds to create an integrated wind, solar and small-scale hydropower electricity joint venture in Brazil, two people with direct knowledge of the plans said.

The main entrance of a Votorantim plant, Brazil's largest diversified industrial group, is pictured in the city of Votorantim, Brazil, April 10, 2017. REUTERS/Paulo Whitaker

The unit known as Votorantim Energia SA has contacted Canada Pension Plan Investment Board over the creation of an integrated clean energy platform, the people said. Votorantim Energia has also discussed the plan with Singapore’s GIC Pte Ltd and several unnamed North American pension funds, one of the people said.

According to the same person, the venture would focus on developing new and existing projects, adding that acquisitions or government licensing bids do not seem to be a priority. Neither person would unveil the size or the estimated value of the venture, noting that a deal is not imminent at this point.

Such a venture would harness growing foreign interest in Brazil’s renewable and clean energy, as the government phases out subsidized funding for fuel and coal-powered plants and more industries adapt to sustainable electricity.

A media relations firm working for São Paulo-based Votorantim declined to comment, as did Toronto-based CPPIB. GIC’s Singapore-based media office did not immediately respond to an emailed request for comment.

The Votorantim conglomerate, Brazil’s No. 1 diversified industrial group, has doubled down on energy to diversify from core metals, cement, pulp and steelmaking. Clean energy projects often provide stable revenue and cash flow streams - generally a goal pursued by pension and sovereign wealth firms alike.

Unlike most large economies, Brazil’s power grid is heavily reliant on renewable energy, with almost two-thirds of installed capacity coming from big and small hydropower dams and another 15 percent from biomass and wind farms, according to government data. The role of solar energy has grown in recent years, although it remains small.


Still, years of harsher-than-expected droughts are forcing the government and investors to rethink the country’s dependence on hydropower electricity while accelerating a replacement of fossil fuels, Mines and Energy Minister Fernando Coelho Filho and other officials have said since May.

“Certainly, a long-lasting opportunity for a venture like this seems to emerge with the ongoing policy shift,” said one of the people, who asked for anonymity to discuss the issue freely.

Currently, Votorantim Energia has about 2.5 gigawatts in generation capacity from dams and other plants. The company’s 1.2 billion-real ($378 million) Ventos de Piauí wind farm project should start operating early next year with capacity of 206 megawatts.

One of the people said Votorantim Energia also has an option to buy a wind farm in the same northeastern state of Piauí with about 360 megawatts capacity. A purchase of the asset could be finalized before year-end, the same person added.

Among some cross-border deals in the sector, Canadian alternative investor Brookfield Asset Management Inc (BAMa.TO) is in talks to acquire control of renewable power firm Renova Energia SA (RNEW11.SA). AES Corp’s (AES.N) generation unit in Brazil bought the Alto Sertão II renewable power project from Renova in April.

Reporting by Guillermo Parra-Bernal and Luciano Costa; Editing by Frances Kerry

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