PORTUGAL’S PLACE IN BRAZIL’S NEW ENERGY BOOM

EDP Expects 10% Annual Brazil Growth With New Plants
Fabiola Moura and Joao Lima (w/Jessica Brice and Stephen Cunningham), May 27, 2010 (Bloomberg BusinessWeek)

"EDP-Energias de Portugal SA, the European nation’s largest power company, expects its Brazilian earnings to grow about 10 percent in each of the next three years as it invests in thermal, wind and hydro power projects…The company’s $100 million Tramandai wind farm in the state of Rio Grande do Sul will be finished by the end of this year…

"Lisbon-based EDP is in a better position than other European utilities to expand in Brazil, where energy projects are more attractive than in the U.S., [EDP Chief Executive Officer Antonio] Mexia said. About 18 percent of EDP’s earnings before interest, taxes, depreciation and amortization, or Ebitda, come from Brazil, a higher percentage than its rivals in Europe…"

Plenty of potential (click to enlarge)

"U.S. projects face “lower demand, a lower price of energy and sluggish regulation,” Mexia said. EDP bought Horizon Wind Energy LLC of Texas from Goldman Sachs Group Inc. in 2007 and says it’s now the world’s third-biggest wind-park operator…U.S. companies added 539 megawatts of wind turbines to the grid in the first quarter, the slowest growth since 2007…

"EDP on May 20 said it will cut annual investment starting next year to 2.4 billion euros ($2.95 billion) in 2011 and 2012 from 3 billion euros in 2010 as it slows wind energy developments in the U.S. and pays lower prices for wind turbines. EDP forecasts its profit will rise at an average annual rate of 6 percent to 8 percent between 2009 and 2012…The Portuguese government owns 20 percent of EDP and state-owned bank Caixa Geral de Depositos SA holds 5 percent."

Room for growth (click to enlarge)

"In Brazil, EDP’s Tramandai project will have the capacity to generate 70 megawatts. EDP also plans medium-sized hydroelectric plants able to produce 150 to 400 megawatts of power…In the long-term, EDP is discussing buying natural gas from companies such as Brazilian state-run oil producer Petroleo Brasileiro SA, which would allow the Portuguese utility to build gas-powered plants. The company’s main focus is on generation rather than distribution…

"EDP forecasts total installed capacity will increase 20 percent to 24.6 gigawatts in 2012, with wind projects and hydropower plants accounting for 66 percent. At the end of the first quarter, it had total installed capacity of 20.7 gigawatts, of which hydropower accounted for 33 percent, wind turbines 27 percent, and gas-fired units 16 percent."