CHINA’S FOOTPRINT IN BRAZIL’S ELECTRICITY SECTOR: EVOLUTION AND FEATURES
LA HUELLA DE CHINA EN EL SECTOR ELÉCTRICO DE BRASIL: EVOLUCIÓN Y CARACTERÍSTICAS
Pedro Henrique Batista Barbosa
Renmin University of China.
Received: 15/03/2021 and Accepted: 03/06/2021
ENERLAC. Volumen V. Number 2. December, 2021 (92 - 115)
ISSN: 2602-8042 (printed) / 2631-2522 (digital)
Foto de Nguyen Khiem de Unsplash.
This article aims at analyzing China’s penetration in Brazil’s electric
sector in each of its three segments and different sources of energy.
It offers the first estimates of Chinese-controlled power generation
installed capacity, kilometers of transmission lines, and number of
consumers in Brazil, and their evolution over time based on Brazilian
official data. In ten years, Chinese electric power companies have
become the main foreign investors, and Brazil concentrates the biggest
part of these corporations’ overseas power generation capacity. Chinese
firms’ investment pattern there is different from other countries,
where they focus on non-renewables. Instead, in Brazil they have
invested where the country has a natural advantage or an abundance of
resources, such as hydroelectric generation.
Keywords: Foreign Direct Investment, Electric Power Sector, Transmission, Distribution, Brazil, China.
El objetivo de este artículo es analizar la penetración de China en el
sector eléctrico del Brasil en cada uno de sus tres segmentos y en sus
diferentes fuentes de energía. Ofrece las primeras estimaciones de la
capacidad instalada de generación de energía controlada por China,
kilómetros de líneas de transmisión, número de consumidores en el país
y su evolución en el tiempo basado en datos oficiales brasileños. En
diez años, las compañías eléctricas chinas se han convertido en los
principales inversionistas extranjeros y Brasil concentra la mayor
parte de la capacidad de generación de energía en el extranjero de
estas corporaciones. El patrón de inversión de las empresas chinas en
Brasil es diferente que en otros países, donde se centran en energías
no renovables. En cambio, en Brasil han invertido donde el país tiene
una ventaja natural o abundancia de recursos, como la generación
Palabras clave: Inversión Extranjera Directa, Sector Eléctrico, Transmisión, Distribución, Brasil, China.
Brazil’s electricity sector has been undergoing a continuous
internationalization process over the last two decades, with foreign
players speeding up investments in the country. Since 2010, this
phenomenon has gained vigor with the arrival of a new player: China.
After ten years, by a combination of mergers and acqui-sitions
(M&A) and greenfield foreign direct investments (GFDI), Chinese
presence in the Brazilian electricity sector has expanded
consi-derably. As of 2019, Chinese electric power companies became the
leading foreign players in the country, owning roughly 10% of Brazil’s
generation segment, 12% of transmission, and 12% of distribution.
Besides, they ranked the second, third, and fourth places in terms of
natio-nalities’ percentage of these sectors respectively.
Reasons for Chinese interest in Brazil abound: Brazil’s still vast
power generation potential (BloombergNEF, 2020), relative saturation of
the Chinese domestic market for big-scale infrastructure projects,
business opportunities brought by the country’s economic crisis and
corruption scandals since 2014, currency depreciation, legal changes
that triggered disruptions in the electricity sector (Becard, Lessa,
and Silveira, 2020), and governmental incentives, such as a stable
regulatory frame in the energy sector (Rosito, 2020) are among the main
Not only China became relevant to Brazil’s electricity sector, but the
South American country had an important role in Chinese companies’
global push. Over the last two decades and particularly after the 2008
worldwide financial crisis, Chinese electricity companies went on an
international spree that reached nearly every continent (Ma, Gallagher,
and Guo, 2019; Cabré, Gallagher, and Li, 2018). Since 2010, Brazil was
one of the main destinations of Chinese electric power firms (Gopal, et
al., 2018; Li, Gallagher, and Mauzerall, 2018). After ten years, it
concentrates the biggest part of these corporations’ overseas power
generation capacity. Some of these, such as State Grid and China Three
Gorges (CTG), have the majority of their external assets in Brazil
(Gallagher, Li, Chen, and Ma, 2019).
Concomitant with the increasing number of Chinese electricity
investments in Brazil, an upsurge of academic publications and media
reports about this phenomenon has followed suit.1 The recent growth of
studies notwithstanding, the actual extent and the evolution over time
of China’s penetration in the country’s electric sector in each of its
segments and sources of energy and the role of Brazil in these
companies’ overseas expansion are not yet well known.
This article aims at analyzing the extension, some reasons, and the
characteristics of Chinese power companies’ assets in Brazil’s
electricity sector and the importance of the South American country in
these firms’ overseas investment plans. Relying on primary sources –
official data from the National Electricity Regulatory Agency (Aneel)
–, it provides the first estimates of Chinese-controlled power
generation installed capacity, kilometers of transmission lines, and
number of consumers in Brazil, their evolution over time, and their
percentage of the whole local system. It argues that Chinese companies
have adopted a distinct investment pattern there, investing
predominantly in renewable energy, in contrast to the dominant coal
portfolio of China’s overseas power electric projects. It concludes
that the case of Brazil illustrates that Chinese players focus their
energy investments where the host country has a natural advantage or an
abundance of resources.
This work has resorted exclusively to primary resources to research
Chinese power generation, transmission, and distribution assets in
Brazil: official documents and databases from the National Electricity
Regulatory Agency’s (Aneel) as of May 2020.
The total of MW attributed to each Chinese company in this article
reflects the firm’s participation in the consortium or concessionaire,
whose ownership structure is provided by Aneel (Aneel, Participacao
Acionaria dos Proprietarios dos Empreendimentos, 2020). The same logic
is applied for Chinese corporations in the distribution segment. In the
transmission part, the kilometers of lines that are attributed to
Chinese actors are not calculated according to the company’s share of
the consortium. If the Chinese player has the controlling stake of the
investment group, the total line is considered Chinese.
For the sake of identifying the nationalities behind each
concessionaire, the following information was checked in Aneel’s
reports: investing companies in the concessionaire, their
nationality/origin, ownership percentage of the plant and installed
capacity. The nationality of each investing company is determined
according to the address registered at Aneel.
Over the years, Chinese electric power firms progressively expanded the
percentage of Brazil’s electricity installed capacity under their
control. In the end of 2019, Chinese companies owned or partially owned
304 power plants, which totaled 16,736 MW.2 This is close to 10% of the
national system, which ended 2019 with 170 GW (ONS, 2020a).
Figure 1. Chinese companies’ installed capacity per source of energy (GW, 2019)
Source: Aneel, 2020a
Figure 1 shows that, in terms of technology mix, 70% of Chinese
electricity capacity in 2019 is in hydropower (11,798 MW). Wind power
took up 17% (2,888 MW), and biomass, solar, oil, and coal comprised 5%
(759 MW), 4% (680 MW), 3% (532 MW), and 1% (79 MW), respectively
(Aneel, 2020a). This distribution reflects the pattern of Chinese
foreign direct investments (FDI) in Brazil, which is concentrated in
hydro and wind plants (Barbosa P., 2020).
Putting Brazil’s electricity matrix and Chinese local electric assets
in perspective, there are resemblances and differences. Primarily, the
latter is similar to the Brazilian overall installed capacity, 64.9% of
which was based on hydropower in 2019. Additionally, both matrixes are
based on renewable energy, with the distinction that the Chinese one
(97%) is even cleaner than the national structure (83.4%) (EPE, 2020b).
Distinctions are: 25% of the national capacity comes from
thermoelectric plants, whereas the Chinese percentage in Brazil is 9%;
Chinese actors invested more in solar and wind (21%), whilst Brazil’s
total capacity is roughly 10%; there are no Chinese investments in
nuclear power, which is 2.6% of the national matrix (EPE, 2020a).
Chinese electricity assets in Brazil diverge from its own national
matrix, of which 27% is based on renewables in 2019 (BP, 2020).
Moreover, comparing China’s investments in Brazil with those in other
nations, new differences emerge. Resorting to data from Boston
University’s GDPC, most of Chinese overseas installed capacity is on
coal power (42%), followed by hydro (26%), gas (15%), wind (6%),
nuclear (5%), solar (4%), and oil (2%). Biomass and geothermal figures
are minimal (Gallagher, 2019). Therefore, 36% of the country’s foreign
power generation came from renewables. The case of Brazil illustrates
that Chinese players focus their energy investments where the host
country has a natural advantage or an abundance of resources.
Of the total Chinese installed capacity in Brazil, the absolute
majority was acquired through acquisitions (94%). Interestingly,
analyzing separately each type of investment, it becomes clear that
while brownfield investments targeted all sources of electricity, with
a prominence on hydropower and wind (Aneel, 2020a), GFDI almost
exclusively went to wind and solar generation (Aneel, 2020b) (figure 2).
Figure 2. Chinese installed capacity in Brazil per technology (GW) and mode of entry
Source: Aneel, 2020a; Aneel, 2020b
Focusing on spatial distribution, the Chinese owned 304 power plants
are dispersed in 17 states and are present in all five regions of the
country. The Northeast concentrated the majority of plants (160), and
the Southeast, the highest capacity (10 GW). Individually speaking, the
Northeastern state of Rio Grande do Norte (RN) has the top number of
plants (79), and the Southeastern Sao Paulo (SP), the biggest
generation capacity (7.9 GW). The Southern states rank third, with 55
units and 2.2 GW, followed by the North with five dams and 0.7 GW, and
the Center-West with three dams and 1.4 GW (Aneel, 2020c).
If one considers the short time since Chinese firms arrived in Brazil’s
power generation sector, the fast pace of their expansion is
remarkable. After some years of low increase of installed capacity,
numbers have grown exponentially after 2015 – when CTG bought Ilha
Solteira and Jupia dams –, reaching 6.7 GW at the end of the year.
Total Chinese-installed capacity jumped to 14.7 GW in 2017 – with State
Grid’s acquisition of Companhia Paulista de Força e Luz (CPFL) – and to
16.7 GW in 2019 (Aneel, 2020a; Aneel, 2020b).
The first Chinese firm to enter Brazil’s power generation sector is
CTG, with the purchase of Energias de Portugal (EDP) in 2011,
guaranteeing therefore an indirect participation in EDP Brasil and EDP
Renovaveis (EDPR), which were already well established in the Brazilian
energy market, with stakes in transmission and distribution as well.
Over the following years, CTG has consistently invested in other
projects in the country. China-Latin America Investment Fund (CLAI
Fund) and the China National Cereals, Oils and Foodstuffs Corporation
(COFCO) followed suit in 2015 and were joined by State Grid, State
Power Investment Corporation (SPIC), Zhejiang Energy, China-Latin
American Cooperation Fund (CLAC Fund), China-Portuguese Speaking
Countries Fund (CPSC Fund), and Canadian Solar in 2017. Jiangsu
Communication Clean Energy Technology (CCETC) and China General Nuclear
Power Corporation (CGN) arrived in Brazil, in 2019 (Aneel, 2020a;
On the company level, figure 3 demonstrates that CTG is the one that
accumulated more generation capacity over the years (6.5 GW in 85
plants) and has Brazil’s second largest installed capacity (Aneel,
2020c). It is present in 12 states, but has the majority of its stakes
in SP (16), Santa Catarina (SC, 18), and RN (37). Its energy technology
matrix is also diversified. It is mainly based on hydraulics
notwithstanding, the company invested also in wind – alone and through
EDPR as well –, solar, and coal power State Grid has 4.3 GW scattered
among 123 units in 10 states. All this capacity belongs to CPFL. This
firm is the third biggest private agent in Brazil’s generation sector –
and the ninth in total (Aneel, 2020c). Its acquisition in 2017 is the
single biggest transaction by a Chinese energy firm and a strategic and
milestone move of State Grid in Brazil.
The reason for CPFL having more units than CTG, but less capacity, is
because it has a more diversified portfolio. CPFL’s own hydro power
capacity do not reach half of its total, with the rest divided among
wind, biomass, oil, and very little solar power. The majority of CPFL’s
plants are in SP (35) and RN (37).
Figure 3. Installed capacity per source (MW) and number of plants3
Source: Aneel, 2020a
Huikai Clean Energy, which is controlled by the CLAI Fund, has a total
of 2.2 GW in 11 hydropower dams in SP (9), Parana (PR, 1), and Mato
Grosso do Sul (MS, 1), always in partnership with CTG, which directly
operates the plants. Other Chinese investment funds active in Brazil
are the CLAC Fund (120 MW) and the CPSF (120 MW). Like Zhejiang Energy
(599 MW), they have joined SPIC to acquire the Sao Simao dam (in Minas
Gerais - MG), their sole possession in Brazil. SPIC operates the
project. By contrast, SPIC has other 11 units in Paraiba (PB) and 930
MW in total.
Distinctively, CGN has no hydroelectric dams and has invested only in
wind and solar generation. It owns 50 plants that total 1.3 GW of
capacity in the states of Rio Grande do Sul (RS, 12), Bahia (BA, 20),
Piaui (PI, 16), and RN (2).
Canadian Solar is the only non-state-owned enterprise (SOE) that has
generation assets in Brazil (23 plants).4 Consequently, 98% of the
Chinese projects in the country belongs to firms indirectly managed by
central and provincial branches of the State-owned Assets Supervision
and Administration Commission of the State Council (SASAC). Chinese
SOE, in fact, are the chief investors in the overseas electric market,
which is a unique feature of Chinese investments vis-a-vis most Western
players (Gallagher, Kamal, Jin, Chen, and Ma, 2018).
Figure 4. Geographical distribution of Chinese installed capacity per source (MW)
Source: Aneel, 2020c; Aneel, 2020e
Figure 5. Percentage of Chinese installed capacity per source and state567
Source: Aneel, 2020c; Aneel, 2020e
Analyzing the geographical distribution of installed capacity in terms
of technology mix, there are some interesting findings (figure 4).
Firstly, hydropower assets are present in all regions, except the
Northeast. Besides the Northeast, there are some wind and solar plants
in the South (RS and SC) and Southeast (SP and MG), although with
smaller numbers. Biomass is mostly concentrated in SP, with one plant
in the states of PR, MG, and RN, each. Oil-fueled power plants are
mainly in the Northeast, with one facility in SP. Lastly, coal is only
present in Ceara (CE). Individually, SP is the state that not only has
the biggest installed capacity overall (7,906 MW), but lead as well in
hydropower (7,197 MW) and biomass (636 MW). RN has the majority of wind
farms, and PI, the most of solar generation (180 MW) (Aneel, 2020c).
Calculating the percentage of how much Chinese players have per source
of electricity in each state, other remarkable results are found
(figure 5). Firstly, in terms of total electricity capacity, China’s
participation varies considerably. Some states’ electricity production
has high contribution from Chinese companies, such as Amapa (AP, 34%),
RS (13%) and PB (11%). However, in general, Chinese shares are small
Secondly, in an electricity source analysis, the situation is
different. For instance, despite the fact that SP concentrates most of
Chinese stakes, China’s participation in this state’s total installed
capacity is minimal (0.1%). However, 48% of the state’s hydro
generation is in the hands of Chinese actors. Different to other places
that rely more on one source of energy, Sao Paulo has a diversified and
balanced technology mix. In AP, RS, and Espirito Santo (ES), 36%, 23%,
and 20% of the hydropower capacity is administered by Chinese
companies, respectively. In wind power generation, Chinese firms
possess 19% of RS’ capacity and 17% of CE and RN. In solar power, they
have 13% in RS and 11% in PI, to name a few.
Positioning Chinese investments in Brazil from a global perspective,
one can understand the role and the importance of the country in
China’s global energy investments. According to data from GDPC, until
2018, at least 63 Chinese energy firms have full or partial asset
ownership in up to 186.5 GW of overseas capacity, distributed through
777 plants. Asia by far concentrates most of the Chinese assets, with
Latin America coming in a distant second place. Individually, Brazil is
the main target, followed by Pakistan, Indonesia, and Vietnam. Out of
the ten biggest Chinese companies abroad in terms of installed
capacity, only three have assets in Brazil, namely CGN (ranking 1st),
CTG (2nd) and State Grid (7th). Some Chinese giant energy firms, such
as China Huaneng Corporation (3rd), CLP Holdings (4th), and China
Huadian Corporation (6th), have no projects in Brazil (Gallagher, Li,
Chen, and Ma, 2019).
Until the end of 2018, CGN accumulated globally a total of 19,740 MW,
whereas CTG 16,718 MW, SPIC 9,178 MW, State Grid 7,409 MW, and Canadian
Solar 3,167 MW. Comparing these numbers with their assets in Brazil
until that year, the South American country represents roughly 6%8,
39%, 10%, 57%, and 9% of their overseas possessions respectively.
Figure 6. Nationalities of generation concessionaires in Brazil (MW)
Source: Aneel, 2020a
Comparing Chinese electricity investments in Brazil’s power generation
sector with other foreign players’ performance in the country over
time, new findings emerge (figure 4). Mapping the changes in the
ownership structure of Brazil’s 8,728 power plants in operation in 2019
and tracing back these modifications until 2010, one may see a process
of continuous internationalization and diversification of the local
generation sector. Over the years, new foreign players from different
nationalities have bought assets or started new businesses. Their share
of the total installed capacity has progressively increased at the
expense of national actors. As of 2019, there were companies from 31
countries active in Brazil (Aneel, 2020a).
Brazilian concessionaires started the period of analysis with 83% of
the generation segment, followed by French and North-American, with
around 6% each. Over time, this situation has changed, particularly
from 2014 on, when Chinese capital started to flow in great quantities.
The entrance of Chinese actors has caused big changes in ownership
structure, progressively occupying the space from local firms and
ending 2019 in the second place. US shares have also decreased over
time. French companies have pretty much kept their annual percentage,
but in 2017 lost their leading position among foreigners to China.
Spanish, Italian, and Canadian corporations’ capacities have grown
steadily year by year, especially the former ones, at the expense of
Dutch and Luxembourgian. After all these changes, 2019 ended with
Brazilian players having 71% of the power generation segment, followed
by the Chinese with nearly 10%, and French with 7%.
Chinese investments per source of energy
China’s hydropower installed capacity in Brazil is 11.8 GW, or 70% of
Chinese firms’ total, and is divided in 93 dams, located in 11 states.
Only the Northeast region has no Chinese administered hydroelectric
dams. Comparing to the country’s total installed hydropower capacity –
operational, under construction, and construction not started –, which
ended 2019 with 111 GW, Chinese firms have almost 11% of the national
Figure 7. Geographical distribution of generation installed capacity per company (MW and number of plants)
Source: Aneel, 2020c; Aneel, 2020e9
CTG is the one with bigger installed capacity (5,965 MW), in 34 dams.
16 are in SC, and most of these (15) belong to Celesc, which is
controlled by EDP (Aneel, 2020 c). In contrast, SP (11) has the
majority of the generation power (4,840 MW). After EDP’s purchase in
2011, CTG has acquired several hydropower dams, assuming the control of
some of Brazil’s largest units, such as Jupia and Ilha Solteira (both
in SP). As a result, CTG became the second major electric generator in
Brazil, behind the state-owned Eletrobras (Aneel, 2020c). It has also
one dam in the states of PR, ES, Goias (GO), Tocantins (TO), Para (PA),
After CTG, CLAI Fund is the one with more installed capacity (2,236
MW). It has participation in 11 dams, one in PR and ten in SP, and all
of them in partnership with CTG, which operates them.
State Grid has 1,887 MW in Brazil, all of them part of CPFL’s
portfolio. This company has a total of 58 dams, in seven states. The
majority are in SP (26), mostly small size (known as PCH). Yet, in
terms of installed capacity, RS has more MW (9 dams). There are also
dams in SC (7), PR (2), MG (11), Mato Grosso (MT), (2), and TO (1).
State Grid has been active in the country since 2010, but only in 2017,
when it bought CPFL, it entered the generation sector. In 2018, it
purchased CPFL’s renewable energy arm: CPFL Renovaveis.
SPIC, Zhejiang Energy, CLAC Fund, and CPSC Fund started to invest in
Brazil’s power generation in 2017, with the acquisition of the Sao
Simao dam (MG). SPIC is the operator and has 51% of the barrage, whilst
Zhejiang Energy has 35%, and the other two, 7% each.
Chinese wind power capacity in Brazil is 2,888 MW, or 17% of Chinese
total installed capacity in the country. Comparing with the national
total of 24,854 MW in plants that are in operation, under construction
or construction not started in Brazil in 2019, it is roughly 12% of the
country’s wind generation capacity (Aneel, 2020c).
State Grid, through CPFL Renovaveis, has the most MW installed (1,494
MW) and the majority of wind farms (51), mostly in the Northeastern RN
(37) and CE (12), but there are four in the Southern RS. The great
majority of the plants were developed before State Grid’s acquisition,
but CPFL’s expansion has continued after, especially through
participation in Aneel’s bids (Aneel, 2020b). After years of heavy
investments in the sector, CPFL became the main single wind power
generator in Brazil (Aneel, 2020c).
CGN comes after State Grid in wind power capacity, with roughly 950 MW,
in 40 plants. The company is present in four states, namely BA (16), PI
(10), RN (2), and RS (12). The firm arrived in Brazil in January 2019
through the acquisition of three farms from the Italian Enel (Enel,
CTG has 385 MW in 41 projects, either directly or through EDPR. The
company is present in four states – RN (3), RS (1), BA (5), and SC (2).
EDPR started investing in Brazil’s wind sector in 2013 through Aneel’s
auctions. In May 2015, CTG bought 49% of 11 farms from EDPR. Over the
following years, EDPR won several new projects in Aneel’s bids.
Lastly, SPIC has 58 MW in 11 farms, all in PB, which belonged to Pacific Hydro Brasil until 2017.
Chinese companies’ solar generation capacity is 680 MW in the end of
2019. With the total of 12,929 MW that are in operation, under
construction or construction not started in Brazil, it is roughly 5% of
the country’s total solar power (Aneel, 2020c).
Canadian Solar is the company that invested the most in Brazil. In the
end of 2019, it had 23 solar farms with 288 MW, mostly under
construction and located in MG (10), CE (9), and Pernambuco (PE, 4). It
has been actively participating in Aneel’s auctions since 2014.
However, over the years, it has done disinvestments, selling a few
solar farms to the French EDF and to Nebras, from Qatar (Aneel, 2020a).
CGN has 10 farms with 300 MW in BA and PI. They are all part of three
solar parks that CGN bought in 2019 from Enel Green Power. This
acquisition led the company to become one of the major solar players in
CTG have 12 plants with 90 MW in total. These all belong to EDPR and
are located in SP (5) and RN (7). Lastly, State Grid/CPFL Renovaveis
have only a small-scale project in SP.
Chinese corporations have 16 biomass plants whose installed capacity is
759 MW as of 2019. Most of them are located in SP. Considering that
Brazil’s total biomass generation capacity in that year was 15,234 MW,
the Chinese share is close to 5% of the whole (Aneel, 2020c).10
CPFL Renovaveis has 10 plants with a total of 455 MW, most of them in
SP (7), but one in MG, PR, and RN. COFCO, in contrast, have six
facilities in SP. They were bought from Noble in 2015.
As for Chinese non-renewable energy facilities in Brazil, their
percentage is small, only 4% (or 611 MW). There are six plants, using
oil and coal to generate electricity. As of end-2019, there were no
projects with nuclear energy. CPFL has one oil-based thermoelectric
plant in the states of SP, PB, and RN. Jiangsu Communication Clean
Energy Technology (CCETC) has two in BA, which were under construction
as of end-2019.
Brazil represents only a small fraction of China’s overseas coal-based
generation investments, which amounted to 79,500 MW in 107 plants, or
42% of the total in 2018 (Gallagher, Li, Chen, and Ma, 2019). The
single coal-based Chinese asset in Brazil is Porto de Pecem I, in
Ceara, and is owned by EDP.
The history of Chinese investments in Brazil’s transmission sector is
entangled with State Grid’s individual expansion there. This firm was
responsible for the absolute majority of Chinese power companies’
investments in the South American country until 2019. Consequently, 87%
of the 16,776 km of Chinese-owned transmission lines belong to it. CTG
– always through EDP and Celesc – and Zhejiang Insigma United
Engineering are other Chinese active players. Their assets altogether
account for almost 12% of the total length of Brazilian lines. State
Grid alone represents more than 10% (ONS, 2020b).11
The first Chinese transmission company to arrive in Brazil was Zhejiang
Insigma. In December 2010, in partnership with Procable and CEEE-GT, it
won a bid to build and operate transmission lines in RS. That is the
only tran saction of the firm in the period of study. In the winning
consortium, it had 40% of the new enterprise Transmissora de Energia
Sul Brasil S.A. (TESB) (Aneel, 2020e), a percentage that diminished
progressively over time and ended at 6.6% in 2019 (Aneel, 2020d).
One week later, State Grid completed the purchase of seven concessions
from the Spanish Plena Transmissora and their 3,250 km of lines
(Barbosa, Tepassê, and Biancalana, 2014). From then on, in a mix of new
projects and acquisitions of companies or transmission lines, as shown
in table 1, State Grid has consistently expanded its assets, sometimes
in partnership with local firms. In 2012, the length of administered
lines more than doubled and increased to 7,918 km. With the Belo Monte
projects, this number jumped to 12,800 in 2015. From 2017 on, CPFL’s
transmission projects were incorporated in State Grid’s portfolio and
the extension of lines reached 14,665 km.
Table 1. State Grid Transmission Lines in Brazil
Source: Aneel, 2020d; Aneel, 2020e
State Grid’s two landmarks – not only in its development in Brazil, but
also in the recent history of the Brazilian transmission sector – are
the two lengthy lines of the Belo Monte dam.
Belo Monte is the nation’s second largest hydropower station and the
fourth biggest in the world, with more than 11 GW of installed
capacity. Its construction was strategically relevant to the country’s
energy security: it was planned to help alleviate the bottleneck
between supply and demand. On the one hand, Brazil’s main electricity
consumer market is located in the Southern regions, where historically
most of the hydropower stations were built and the local electricity
generation potential is already well developed. On the other hand, the
country’s new frontier for large-scale hydropower projects is in the
Amazon basin, a region not densely populated and whose generation
potential has not yet been fully realized. Estimates show that around
70% of untapped hydropower resources are located in the North of the
country (Aneel, 2008). Belo Monte was planned to help equilibrate this
delicate balance, but its location in PA, far from the South, has
created an additional layer of challenge: transmission of electricity
over great distances (Cote, 2014).
State Grid’s expertise and technical experience in long-distance
transmission lines in China have matched with Brazil’s necessity of
upgrading its national power grid, which had been facing hurdles over
the years, as the 2009 blackouts have shown (Husar and Best, 2013).
China has also confronted the challenge of unequal distribution of
renewable energy resources and load centers, which was overcome with
the deployment of ultra-high voltage technology (UHV, 800kV) (Proenca
and Kupfer, 2018; Cui and Zheng, 2019).
Belo Monte’s transmission line project had two phases. Phase I involved
the construction of nearly 2,100 km of lines from Xingu (PA) until
Estreito (MG) and was inaugurated in December 2017 by the consortium
Furnas (24.5%), Eletronorte (24.5%), and State Grid (51%). Phase II’s
more than 2,500 km of lines from Xingu to Rio de Janeiro were built by
State Grid alone and completed in June 2019. Both phases mark the first
time that an 800 kV UHV transmission line is operated in another
country by State Grid, which owns the concession for thirty years
Table 2. EDP Transmission lines in Brazil
Source: Aneel, 2020e; Aneel, 2020d
CTG’s footprint in Brazil’s transmission sector started in 2016 and
through EDP, which has built its portfolio of approximately 2,111 km of
lines through new projects and purchase of local companies, such as
Litoral Sul Transmissora de Energia (EDP, 2019) and Celesc (EDP, 2018),
both in SC, as shown in table 2.12
Geographically speaking, Chinese firms are present in all five regions,
in 16 states. State Grid is the only one active in all regions, 14
states in total. CTG/EDP is concentrated in Southern states (such as
RS, SC, SP, ES, MG), where historically EDP has a traditional stance,
with the exception of a project between Maranhao (MA) and TO. Zhejiang
Insigma possesses only one project in RS.
It is interesting to put Chinese investments in Brazil’s transmission
sector in perspective and evaluate the changes of the segment as a
whole during the last few years. As in generation, there is a
continuous process of internationalization of the segment over time,
with foreign players expanding their projects in the country (figure
Figure 8. Countries’ percentage of the transmission sector (km of transmission lines)
Source: Aneel, 2020d; Aneel, 2020e
Chinese firms as a whole possessed roughly 12% (16,590 km) of the
national grid in 2019, ranking third place, after Brazilian (60%) and
Spanish (13%) players. Their development happened in a faster rhythm
than other competitors, especially considering that their investments
started in 2010, well after their international peers. Colombian (9%)
and Indian (3%) actors have equally experimented a rapid development
over time (Aneel, 2020d).
Chinese companies’ arrival in Brazil’s electricity distribution sector
coincides with the generation segment. The 2011 CTG’s acquisition of
EDP gave the former indirect assets in two local concessionaires: EDP
ES and EDP SP. At the end of 2019, six other regional corporations –
out of 109 – have also Chinese full or partial ownership, namely
Celesc, RGE, RGE Sul, CPFL Paulista, CPFL Jaguari, and CPFL Piratininga
CTG and State Grid are the only Chinese firms with investments in
distribution and all their transactions come from M&A. Since 2011,
CTG’s assets are through EDP Brasil, which fully owns EDP Sao Paulo
Distribuicao de Energia and EDP Espirito Santo. They provide
electricity to SP and ES correspondingly. In 2018, EDP Brasil started
to buy shares of Centrais Eletricas de Santa Catarina (Celesc) and
ended up with 33.1% (EDP, 2018).
State Grid’s presence started in 2017, with the acquisition of CPFL,
which, as in the generation sector, was equally strategic to the
company’s expansion in the distribution segment. CPFL is historically
one of the biggest electricity providers. A few months before this
transaction, it had just assumed the full control of RGE Sul
Distribuidora de Energia and RGE Rio Grande Energia, both located in RS
(Costa, 2016). With CPFL’s acquisition, the number of consumer units
attended by Chinese firms expanded more than seven times.
Considering each Chinese company’s shares in their local
concessionaires14, State Grid and CTG have the equivalent of 114 and 12
million consumer units, respectively. In sum, they represented in 2019
roughly 12% of Brazil’s distribution sector’s consumer units.
Separately, the former accounted for 11%, and the latter, 1% (Aneel,
Chinese companies are present in four states, with are strategically
important ones, since they have large populations, high GDP and higher
electricity consumption rates. These firms’ share in each of them has
varied over time. In ES, EDP ES is the leading company. Considering
CTG’s indirect share of it, Chinese participation in the local
distribution sector is around 20%, a percentage that has remained
stable over the years. In SP, Chinese participation started small,
roughly 2% until 2016, but augmented considerably after 2017 – with
CPFL’s acquisition –, ending 2019 with 38%. In SC, Chinese
participation started in 2018, when EDP partially bought 7% of Celesc.
Finally, in RS, participation only started in 2017 and has remained 58%
until 2019. This is due the fact that RGE – owned by State Grid – is
the state’s major concessionaire.
Examining data about the ownership structure of each of the one hundred
plus distribution concessionaires in Brazil between 2014 and 201915,
figure 9 shows a process of continuous internationalization of the
segment, with foreign actors increasingly augmenting their stakes over
Figure 9. Countries’ percentage of the distribution sector (number of consumer units)
Source: Aneel, 2020d; Aneel, 2020f
Besides China, there are basically three other countries whose
corporations have been traditionally present in the Brazilian
distribution sector: Italy, Spain, and USA. US firms and investment
funds have been consistently investing in Brazil’s energy sector since
its first wave of privatization, in the late 1990’s. One of the main
actors was AES group, with assets across all electricity segments. AES
was the former owner of Eletropaulo and RGE Sul, which were acquired by
Enel and CPFL respectively (CPFL, 2016), leaving the US with no other
major assets in Brazil. Between 2014 and 2017, the share of the country
remained a little less than 10%.
Like the Chinese, Spanish and Italian firms have made big strides over
the last few years. The main Italian player is state-controlled Enel.
After two big acquisitions in 2016 and 2018 – respectively Celg-D (in
Goias) and Eletropaulo (SP) –, it became Brazil’s largest electricity
distributor. The share of Italian companies between 2014 and 2019
varied from 7% to 20%.
The leading Spanish player is Iberdrola, which has investments in
different electricity segments. In distribution, it arrived in the
early 2000’s and in the last few years has increased its shares and
assumed bigger controlling stakes in its concessionaires. The share of
Spanish firms between 2014 and 2019 grew from 3% to 17%.
A noteworthy feature of these shifts of owner-ship in the distribution
sector is the nature of the companies involved. On the one hand, the
decrease of Brazil’s proprietorship shares in the segment happened
mainly at the expense of domestic government-owned corporations, whose
assets were partially privatized over time. On the other hand, foreign
state-controlled firms were the major buyers of these concessionaires,
as is the case of Enel and State Grid. By the end of 2019, these firms
possessed roughly 36% of the entire sector.
The paper provides a thorough portrait of Chinese presence in Brazil’s
electricity sector, how deep China has penetrated in each three
segments (generation, transmission, and distribution) from 2010 to
2019, and to analyze the importance of Brazil in Chinese electric power
companies’ global expansion.
It shows that an internationalization process in the Brazilian
electricity sector was already going on when Chinese power electric
firms disembarked and joined the already under-expansion club of
investors. Their growth was impressive and much faster than other
competitors over the last ten years. As of 2019, they were the main
foreign players in the South American country, where they are
responsible for roughly 10%, 12%, and 12% of the local generation,
transmission, and distribution, or 16,736 MW, 16,776 km of lines, and
126 million consumer units respectively. Chinese players have reached
the second, third, and fourth places in terms of nationalities’
percentage of each segment, according to Brazilian official data.
This articles also debates that Brazil became a strategic part of
Chinese electric firms’ global plans. The South American country
concentrates the majority of China’s global power properties. State
Grid, CTG, CGN, and SPIC have invested heavily there and possess
roughly 57%, 39%, 6%, and 10% of their overseas power generation assets
This paper argues that, as a distinct pattern, these corporations focus
their energy investments where Brazil has a natural advantage or an
abundance of resources: renewable energy. 70% of China’s installed
capacity is in hydroelectric generation. Chinese non-renewable energy
facilities in Brazil amount to 4% of their total in the country.
Elsewhere – including inside China itself –, non-renewables have
received most of Chinese power firms’ investments (64%), with a focus
on coal power (79,500 MW in 107 plants worldwide) (Gallagher, 2019).
There is only one coal-based Chinese asset in Brazil.
Based on these ten years’ experience and the long-term business
commitments made by Chinese power companies, it is hard not to predict
that, in the coming decade, they will have an important role in the
continuous development of the Brazilian electricity sector, where
Chinese exploration and operation rights will last for at least thirty
years. Brazil’s still expanding electricity consumer market and
infrastructure expansion necessities constitutes an attractive scenario
for players with a long-term strategic sight.
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1 Leite and Vanderlei (2017), Cote
(2014), Cui and Zheng (2019), Hiratuka (2018), Vanderlei (2018),
Barbosa, Tepassê and Biancalana (2014), and Proença and Kupfer (2018)
study State Grid’s activities. Hochstetler and Kostka (2015) and
Cuperstein (2014) examine the wind and solar sectors. Xu (2019)
analyzes the bilateral cooperation in renewables. Cavalcante (2018)
focuses on solar energy. Silveira (2018) assesses the Chinese
state-owned energy enterprises investments in Brazil and their
strategic interest in the Amazon. Tang (2017), Da Silva (2019), Becard
and Macedo (2014), Ferreira, Santos and Neves (2019), and Schutte and
Debone (2017) write about Chinese investments in the electric sector as
a whole. Husar and Best (2013) discuss the possibility of bilateral
technology cooperation. Becard, Lessa and Silveira (2020) emphasize the
political and economic impacts of Chinese investments.
2 The total of MW attributed to each Chinese company here reflects this firm’s share in the consortium or concessionaire.
3 The number of plants refers to
the units where each company have stakes; in some plants, more than one
Chinese company have shares.
4 State Grid, CTG, CGN, and SPIC
are central SOE, directly supervised by SASAC. Zhejiang Energy Brazil
belongs mostly to Zhejiang Province’s SASAC. CCTEC Brazil belongs to
the provincial government of Jiangsu. Canadian Solar was founded in
Canada, but has the majority of its manufacturing presence in China.
5 Aneel does not provide separate
data about thermoelectrical energy sources, such as coal, oil and
biomass in the state level. Therefore, the numbers used for calculation
are those of the generation capacity of thermoelectrical dams in each
6 The data chosen about state’s
total generation capacity encompasses those related to operational,
under construction and construction not initiated, because some Chinese
projects are still not operational.
7 Since Aneel does not provide
historical data of each state installed capacity per technology, the
numbers used are from May 2020.
8 Since CGN’s first investment in
Brazil was in 2019, for the sake of comparison, we are using these
numbers to compare with the company’s total assets through 2018.
9 As of May 2020, Annel does not
differentiate thermoelectric plants by technology in its generation
database (Aneel, Sistema de Informações de Geração da ANEEL, 2020).
Therefore, coal-fueled plants are included in biomass here.
11 The length of transmission lines
used here is the one provided by Aneel as of May 2020. The kilometers
of lines that are attributed to Chinese actors are not calculated
according to the company’s share of the consortium. If the Chinese
player has the controlling stake of the investment group, the whole
line is considered Chinese.
12 Shanghai Electric had plans to
invest in Brazil’s transmission sector. In November 2017, in
partnership with CLAI Fund, the firm signed an agreement with the
state-owned Eletrosul, in order to jointly invest, construct, operate,
and maintain 1,900 km of lines in RS. Both Chinese players would have
69% of the new society. Zhejiang Energy has also showed interest in the
transaction. However, all Chinese actors decided to withdraw from the
deal (Aneel, 2018).
13 A concessionaire’s nationality
is defined according to the company or group of companies from the same
country that have the majority of the controlling shares of the local
transmission firm (Aneel, 2020d).
14 The number of consumer units
administered by Chinese firms is estimated according to the company’s
share in each local concessionaire/plant.
15 Period of time that there is complete data available as of May 2020.
16 A concessionaire’s nationality
is defined here according to the company or group of companies from the
same country that have the majority of the controlling shares of the
local distribution firm.