Taesa Mulls Acquisition of Abengoa's Brazil Transmission Lines

  • Abengoa owns about 10,000 kilometers of transmission lines
  • Negotiations for the acquisition are `on hold,' CEO says

Transmissora Alianca de Energia Eletrica SA, a state-owned operator of power lines in Brazil, is considering the acquisition of Abengoa SA’s transmission assets in the country as the Spanish company teeters on the edge of insolvency.

“We are interested in the assets,” Chief Executive Officer Jose Aloice Rogone Filho said in an interview Friday. “We are on hold for now, waiting to see what’s going to be Brazil’s government decision about Abengoa operations.”

Abengoa is Brazil’s biggest non-state owned transmission line operator, with about 10,000 kilometers (6,250 miles) of lines in operation and under construction. The Seville-based company received approval Friday to seek bankruptcy protection in Brazil for some units, according to a document obtained by Bloomberg. That comes amid a larger effort to restructure debt and shed operations around the world.

Abengoa’s Brazil unit has total net debt of 3.3 billion reais ($825 million), according to another document obtained by Bloomberg. The company is working with advisers and banks on a new business plan and has hired the Brazilian consulting firm G5 Evercore to lead its financial restructuring.

New Projects

The government is talking to Abengoa and other companies to ensure that its assets are protected. It has nine transmission projects under construction in Brazil, and five of them are expected to start operations this year.

That includes the ATEXVI and ATEXXI lines, which will connect the massive Belo Monte hydropower project to major southern energy consumption centers in Brazil. ATEXVI will require total investment of 2.3 billion reais and Abengoa has paid about 52 percent of that to date, according to the bankruptcy document.

Taesa, as Brazil’s transmission company is known, is majority-owned by the state-controlled Cia. Energetica de Minas Gerais SA and has purchasedother Abengoa assets in the past, including a 2011 deal worth 1.1 billion reais.

Under the existing terms it would be difficult for Taesa to take over some of Abengoa’s projects, Rogone Filho said.

“The way it is now, there is no condition for us to advance in the negotiations,” he said. “We know those assets, and their return and deadline conditions don’t make sense for Taesa.”

‘Non-Conventional’ Measures

The government is considering “non-conventional” measures to guarantee that the Abengoa lines remain in operation and the new ones are completed, Rogone Filho said. That may include reviewing the terms of the contracts or selling the assets in an auction, with new financial terms. 

“These would be interesting for us,” he said. “It can motivate us to advance in the acquisition studies.”

The lack of transmission capacity has become a significant problem in Brazil. More than 60 percent of transmission lines, or 220 projects under construction in the country, were delayed as of December, according to a document from Brazil’s energy regulator Aneel. Difficulties getting environmental licenses caused the most delays.

“Abengoa’s solution doesn’t involve only an acquisition process, but a political decision,” said Tiago Lobao Cosenza, a partner at the Leite, Tosto e Barros Advogados law firm who specializes in energy. “The government might step back on previously set rules. Abengoa’s assets are too strategic for Brazil.”

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