While the Brazilian economy has yet to fully recover from economic recession, renewable energy projects are slowly, but steadily showing signs of recovery.
At the beginning of the year, the Brazilian Northeast Bank, known as Banco do Nordeste (BNB) increased its finance limit to 80% of the cost for energy projects. The bank also operates the constitutional financing funds of the Northeast (FNE), one of the three portfolios with access to the BRL 3.2 billion (USD 790.1m/EUR 682.5m) credit line of the Ministry of National Integration for the finance of distributed and centralized solar power generation projects in urban and rural areas.
Renewables Now discusses finance options for renewable energy projects in Brazil with Helton Chagas Mendes, Superintendent of Wholesale and Government Business at the BNB.
Q: How do investors see the Brazilian renewable energy market?
A: They see it as a good investment opportunity, not only for the generation potential in the wind and solar capacity (specially in the Northeast region), but also by due to the country's market regulations, which provides contracts with good liquidity and security for the return of investments.
Q: What investors need to know about Banco do Nordeste's long-term strategy for renewable energy financing?
A: In addition to FNE funds, the bank has resources to also offer special interest rates and loan terms that suit different projects, ranging from energy generation to infrastructure for transmission schemes.
We are not yet participating in climate finance.
Q: Where is the BNB active in Brazil?
A: The bank makes its resources available for projects that are located in the Northeast region, including the northern parts of Minas Gerais and Espirito Santo states.
Q: What are the advantages and challenges of working in the local currency (BRL)?
A: Considering that the ventures will have their revenues in BRL, it is evident that it is best to marry the financial expenses in the same currency.
In the case of the FNE resources, we have another advantage. The revenues of the projects are mostly (in Brazil's regulated market), updated by the Consumer Price Index (IPCA), which is one of the components of BNB's interest rate for the fund. Thus, we will have the same update for the cash flow and the debt balance, bringing greater peace of mind and clarity in regards to the expected return.
Q: Is there a different approach to financing projects depending on the renewable energy source they are using?
A: Under the FNE rules, the rates vary according to the size of the schemes, regardless of their energy source. Centralized generation projects, for instance, have a majority of same rates as they are considered large-scale. In distributed generation (DG), we can have different rates, since small to medium-sized companies are the primary investors in this segment. The rates applied this month can be consulted on our website.
Q: In BNB's view, what are the future prospects for investments in Brazil?
A: Brazil is a country that still requires more investments to develop, еspecially in infrastructure. The sector the most opportunities for investors and there is a growing interest in the use of all forms of partnerships - concessions, auctions and public-private partnerships (PPPs), to meet the demand for new infrastructure.
(BRL 1 = USD 0.25/EUR 0.21)
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Small solar system in Brazil. Author: Tony Winston/Agência Brasília.
