Entrevista Fernando Flach - BNamericas | Parte 2 | Taking a step further into Brazil's energy se
Taking a step further into Brazil's energy sector
In this second part of a two-part interview, Fernando Flach, founding partner of Flach-Philippsen Associates, spoke to BNamericas about Ouro Negro thermal power plant, a 600MW coal-fired facility that the company wants to take part in Brazil's next energy supply auction.
Although much of the focus in recent auctions has been on renewable power sources, they are known to be intermittent and seasonal, so Flach believes there is plenty of room for a coal-fired plant in the Brazilian energy matrix, particularly considering the competitive generation price of this fuel and the fact that the US$950mn Ouro Negro plant uses modern clean coal technology.
BNamericas: After having positive experience with the small hydroelectric plant in Santa Catarina state, the restructuring project of which was the gateway for Flach-Philippsen Associates into Brazil's energy sector, what was next?
Flach: Over the past few years, we've been working hard on the structuring of the Ouro Negro Energia thermoelectric coal-fired plant, which is also located in the south of Brazil. We weren't able to participate in the last energy auction, because the project hadn't yet had its environmental license issued by the competent agency. After a careful licensing process, authorization was granted for the Ouro Negro plant. However, the price ceiling for coal in the last auction was really disappointing.
BNamericas: Is this a problem related to coal-fired projects? What others issues are involved in the development of this kind of power plant?
Flach: The difficulties are well-known. I believe this issue needs to be demystified. It needs to be treated in a more technical and less ideological way. What's at stake is the safety of the energy supply system. Only thermal power sources guarantee reliability of supply and consistent dispatch of electricity, since Brazil no longer has the possibility of building new hydroelectric plants with reservoirs.
Flach-Philippsen has worked on the projects for more than 10 wind farms in Brazil, which are now in commercial operation. I'm a fan of this source of energy. However, it's well-known that renewable sources are intermittent and seasonal. I'm sure there's room for all energy sources in the Brazilian energy matrix.
Rio Grande do Sul state, where this project is located, has more than 90% of Brazil's coal reserves. Therefore, it's essential to be efficient and to exploit the advantages of each region of the country. The Ouro Negro plant meets the most stringent parameters of environmental sustainability, which is why we received the environmental license. This project will have the most modern clean coal technology that's available on the market.
BNamericas: What will the project's generation capacity be and how is the development being carried out?
Flach: This is a challenging and strategic project for Rio Grande do Sul state. At present, Rio Grande do Sul imports more than 50% of the electric energy it consumes from other Brazilian states. Ouro Negro will have a 600MW power generation capacity in the first phase of construction, for which the investment is estimated at US$950mn.
The plant was designed for the city of Pedras Altas and its construction should create around 2,000 new jobs. In addition, the agreements were already signed with the city hall and representatives of the state government. This project will likely have an above average rate of return when compared to other energy and infrastructure projects under construction in Brazil.
BNamericas: How has the financial structure been planned for the construction of this project?
Flach: The capital structure of the Ouro Negro plant is currently being planned. We won't depend on BNDES [Brazilian development bank] for credit lines, and we've already received firm proposals from international banks that want to take part in the project, in addition to Chinese companies that were involved in the conception of the plant.
BNamericas: What are the company's expectations regarding the next Brazilian energy auction?
Flach: We expect victory. We're very confident about this project, but we're trying to keep our expectations close to reality. We're aware that the result of the auction will depend on the energy generation capacity that the Brazilian government is willing to contract, and, of course, on the price competitiveness of electricity sales.
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