Bloomberg News

Brazil Considers Local-Content Requirement for Electricity Bids

April 16, 2013

Brazilian regulators may require developers participating in auctions to supply energy to get a percentage of their power equipment locally to help protect against Chinese imports.

The measure will reinforce an existing local-content requirement on goods bought using loans provided by development bank Banco Nacional de Desenvolvimento Economico e Social, Luciano Cunha de Sousa, analyst for external commerce at the Ministry of Development, Industry and Foreign Trade, said today in an interview.

While many companies already opt to source the bulk of their equipment locally to get debt from BNDES, as the lender is known, some may buy from Chinese suppliers which is often packaged with financing from China’s Development Bank, Roberto Veiga, manager of energy at Bardella SA Industrias Mecanicas, said at a conference in Sao Paulo today.

“This protection is necessary to avoid the import of turbines with external financing,” he said. “It will provide more clarity for investments in supply chains for these kinds of equipment.”

The percentage of how much equipment will have to be sourced locally is still to be defined, Sousa said.

A working group for the National Council for Energy Policies, an advisory body for the Ministry of Mines and Energy known as CNPE, is also studying ways of boosting the participation of alternative-energy technologies by raising the price offered by other power plants in auctions, he said. In Brazil’s power auctions, developers bid down the price at which they’re willing to sell power, and the lowest offer wins.

The working group is expected to make a proposal on both the local-content requirement and auction-bidding rules when the CNPE meets at the start of June, Souza said. They may apply to auctions this year and lead to higher electricity prices in Brazil.

The working group “needs to calculate what price society should pay for this increase in energy rates and weigh it against the benefits for industry,” Souza said. “We’re not just looking for the cheapest energy but a balanced grid.”

To contact the reporter on this story: Stephan Nielsen in Sao Paulo at snielsen8@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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