Friday, October 14, 2011

Chinese government plans a role in the transmission of energy from Belo Monte Dam (Brazil)

This is an unofficial translation of a Portuguese-language article which
appeared in "Valor Econ�mico" (

Chinese government plans a role in the transmission of energy from Belo
Monte Dam (Brazil)

Claudia Schuffner, Valor published 10/11/2011.

Original link:

Largest power company and the world's seventh largest company listed
among the Fortune 500, the Chinese state-owned State Grid Brazil
Holdings made another acquisition in the country. Just bought, for $205
million, an entire building and the new Avenida Presidente Vargas in Rio
de Janeiro. It's a step in the installation of the company that has
invested nearly $ 3.5 billion in the country since last year. The
amounts were spent on the acquisition of seven power transmission
companies controlled by the Full Broadcasters, the Spanish Elecnor,
Isolux, Abengoa and Cobra for $1.89 billion and discharge of a loan of
$1.338 billion from the National Bank for Development Economico e Social

With the acquisition of the building, which will be used initially only
the last five floors, the State Grid's investment comes to $3.433
billion. But this may be just the beginning. Cai (pronounced Chai)
Hongxian, CEO and board of directors in Brazil, said the appetite for
the country is not a passenger.

The executive, who left China in 2010 to live in Rio, is interested in
disputing the concession to build the transmission lines that will
transmit 11,223 megawatts (MW) of energy that will be generated by
hydroelectric Belo Monte for the rest of Brazil, but that's not it.
While the market awaits definition of the Energy Research Company (EPE)
on the design and other technical details of this line - which will be
auctioned in 2012 and is still in design phase - the State Grid seeks
partnerships. State Grid is interested in partnerships with companies
that have Brazilian (state and private) and international projects for
generation of any source is hydroelectric, wind, biomass and solar. The
search for partners involves projects in Brazil and other Latin American
countries. Among the companies that have had conversations with the
Chinese Hongxian mentioned Copel, AES, Cemig Alupar, Eletronorte and
Network Group. With Eletrobras memorandum of understanding was signed to
develop projects together. With the National System Operator (ONS) a
memorandum provides for exchange of technology and the philosophy of the
State Grid.

The acquisition of the building is cited by the president as a
demonstration that the country is in long-term plans. "Brazil is
experiencing an economic boom, will host the World Cup and the Olympics
and, more importantly, is a large market. That's what caught our
attention. It is one of the BRICs," Hongxian responds when asked why the
Brazil is the second target of the State Grid foray abroad since it was
created by the Chinese government in 2002. The first was the
Philippines, which has 40% stake in the company that operates the
transmission network in the country, the National Grid Corporation of

In the interview, the first since the arrival in the country, the
executive said that the fears are unfounded denationalization of
industrial equipment with Chinese input, and also comes forward saying
the company has no plans to import cheap labor from China. "It does not
exist. Would be too expensive to bring people and their families to work
here. We want to Brazilians," said Hongxian. "We did not come to destroy
the energy industry in Brazil. We want to work with local partners and
share experiences. No one need worry."

He seems familiar with the concerns surrounding the arrival of an
integrated energy company controlled by the Chinese government and meets
80% of the population of his country with the amazing number of 1
billion consumers (80% of the population of China, including Tibet). The
State Grid has numbers superlatives: it employs 1.5 million workers,
revenues of $ 240.6 billion in 2010 and operates in 88% of China.

The generation capacity in December 2010 was 962.19 gigawatts (GW) -
Brazilian eight times the capacity of 113.32 GW - and that since 2002
has grown at an astonishing rate of 12.39% per year. The State Grid
Corporation of China (SGCC) operates 618,800 km of transmission lines,
and the largest, 1,900 km of lines of 800 kV DC, has no similar in
Brazil. Compared with these numbers, Eletrobras is a medium-sized company.

There are few competition concerns in China to have this power. When she
got the full, in May 2010, some executives interviewed said they were
concerned by the value given the ease of access to the capital of
China's low cost and very cheap equipment manufactured in their own
country, not to mention the extremely low cost of labor.

Hongxian know the fears. And made sure to emphasize during the
three-hour interview that there is nothing to fear. "We came to work
with partners. The State Grid is huge in China but in Brazil is a
newcomer. There is nothing to fear."

And insisted on two points that explain, in his view, need to be better
understood on the company. "We have no subsidy. The Chinese government
does not subsidize companies abroad. And though subsidiaries of state,
they go to countries to act in accordance with local regulations and be
competitive as any other, as equals," he said.

Concerning the acquisition of equipment in the country of origin,
Hongxian states that the account is not so simple. "In China (the
equipment) is cheaper than in Brazil. But in terms of freight, customs
duties and taxes, these products do not become as competitive as they
would if they were on Chinese territory. This is all being studied.
Depending on the product tariffs are 70% to 80% may make it impossible
that such a strategy. "

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