June 19 (Bloomberg) -- Biosev SA, Brazil’s second-biggest sugar-cane processor, is selling electricity from a 77.8-megawatt biomass plant in the country’s center-west state of Mato Grosso do Sul as low prices prompt it to pull back from the energy market.
The 163 million-real ($73 million) Passa Tempo project at the company’s Rio Brilhante mill runs on cane residue, Sao Paulo-based Biosev said today in a statement. The plant began selling power May 24 to large energy consumers and was inaugurated today. It won contracts in a 2011 government-organized auction to deliver electricity to distributors for 102 reais a megawatt-hour, starting in March.
Biosev won’t sign any more contracts to sell power from new biomass plants in auctions unless the rates go up, Chief Executive Officer Christophe Akli said in an interview today. No biomass developers won contracts in a December auction after the government set a maximum price of 112 reais.
“The price in the last auction didn’t justify investments,” Akli said. “A project won’t be viable unless we see a price between 150 and 200 reais.”
The next power auction is set for August. In Brazil’s power auctions, regulators set a ceiling rate and developers bid down the amount at which they are willing to sell power. The lowest bids win contracts.
The Passa Tempo project has three turbines and a 76-kilometer (47-mile) transmission line, according to the statement.
As much as 80 percent of the project was financed by Fundo Constitucional de Financiamento do Centro-Oeste, a government development fund, according to Kleber Wagner Froes, relations manager for Banco do Brasil SA, the state-controlled lender that disbursed the loan. The 8.5 percent loan will be paid back within 12 years, he said in an interview.
Biosev has 12 cogeneration plants online with 540 megawatts of total capacity. Nine of them sell power to the grid, and the company could double the amount of energy it exports to the grid by expanding its existing biomass plants, Akli said.
Raizen Energia SA is the world’s biggest crusher of sugar cane.
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