Sector focus
development of new wind and
solar projects by expanding the
production chain in Brazil. He
adds that the new government’s
liberal stance will also usher in
legal and regulatory changes
that will enable the creation of a
wholesale power market enabling
more customers to choose their
power supplier. “The new
government is committed to the
development of renewable energy,
and frequent renewable energy
power auctions are key for the
development of wind and solar
power, which also depends on an
increase in power demand,” De
Lima Ramos explains.
The new government will need
to accelerate energy contracting
through auctions to meet growing
demand, though demand in the
short term can be met by existing
thermoelectric plants, says José
Roberto Oliva Junior, associate at
Pinheiro Neto. “We are conducting
studies and having discussions
with several players in the sector,
both developers and financiers,
and Brazil has some challenges
to overcome so that the lack of
energy is not a limiting factor for
the country’s growth,” he adds.
Oliva Junior argues the
incoming government needs
to ensure regulations are more
predictable and stable, draw
up clearer rules for distributed
generation, tie power-purchase
agreements to the US dollar,
and make better use of capital
markets for funding. He also calls
on private banks and Brazil’s
development bank BNDES to have
greater participation in project
financing, as well as advocating
changes to legislation related
to the acquisition of land by
foreigners so that rural property
acquired for the generation and
distribution/transmission of
energy are not covered by the
current restrictions.
Communities are likely to
protest against some projects if
the environmental permit process
is streamlined, says Oliva Junior.
“There could be a few protests at
the beginning, but if acceleration
is carried out in a responsible
and sustainable manner, which
we believe is likely to happen, it
www.thelatinamericanlawyer.com
will be beneficial to the energy
sector in general, especially to
the renewable energy sector,”
he adds. “Accelerating licensing
processes does not necessarily
mean that the required studies
will not be carried out, and it
is currently the delay in the
issuance of environmental licenses
that is greatly delaying the
implementation of projects.”
Oliva Junior rejects suggestions
that uncertainty among investors
could increase as a result of
Bolsonaro’s victory. “The market
has great expectations regarding
the possible beneficial changes
in the regulation of the energy
sector,” he says. “From what
we have seen to date, the new
government has been forming a
good technical team in several
sectors, now we must wait to
see the privatisation policies of
López Obrador,” Oliva Junior
adds. He says the appetite among
foreign companies and funds
for investments in the Brazilian
energy sector has increased
substantially since the beginning
of 2018, while the coming year
is expected to feature notable
privatisations, mergers and
acquisitions, energy auctions
and new domestic and foreign
investors.”
‘A little vague’
Law firms are receiving a
significant amount of instructions
related to the financing of wind
projects as work related to
acquisition financing for new
projects, specifically debt offerings
in the capital markets, according
to Paulo Vieira, a partner at Vieira
Rezende Advogados. However,
she adds Bolsonaro’s proposals
are still a “little bit vague”. Vieira
continues: “Although during
his campaign he mentioned
changes to the environmental
licensing process, this can
create problems with the local
population and result in delays in
the development of projects. By
creating a safe legal environment,
investors will feel confident in
funding renewable energy projects
and the structuring of project
finance will be less a challenge
than it has been in recent months.”
Debora Yanass, Tauil & Chequer
Advogados
Tiago Kummel Figueiro, partner at
Veirano Advogados, is confident
that renewables projects will
not face conflicts in Brazil, but
adds that hydroelectric projects
earmarked for the Amazon
rain forest might. “Bolsonaro’s
intentions have more to do with
big hydroelectric projects in forest
areas, which currently face lots of
criticism and difficulties related
to permits and the settlement
of disputes with indigenous
communities,” he explains. “If
new, big hydroelectric projects
are to become more abundant
in Brazil as a result, we might
see a slow-down in renewable
deployment.”
Generally speaking, investors
are optimistic about the future
of the renewable energy sector
under Bolsonaro. “There is some
uncertainty regarding the timing
for implementing the changes that
were discussed in the Ministry
of Mines and Energy’s public
consultation on the restructuring
of the energy sector,” says
Kummel Figueiro. “The changes
include a discount on the tariff for
the use of the transmission and
distribution grid by renewable
energy generation projects – but,
in principle, there would be no
impact for the projects already
implemented.”
Lawyers are also confident
that the electric power auction
programme will continue as the
government will strive to increase
capacity to meet growing demand.
Kummel Figueiro says: “One of
Bolsonaro’s main objectives is to
increase the renewable energy
share in the Brazilian matrix.”
December 2018 • THE LATIN AMERICAN LAWYER • 19