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Alessandro Gregori Filho

Director of CPFL Renováveis


The meaning of partnership

CPFL has been known as a company that sells and distributes energy since the 1990’s. Since August, it has been running CPFL Renováveis, a subsidiary exclusively dedicated to renewable energies, which will concentrate efforts and investments in the generation of energy from sugarcane biomass, wind and solar sources, as well as small hydroelectric plants.

One important feature of the creation of this company is precisely the meaning of partnership. CFPL is not a company of the sugar and ethanol industry, but it has developed ways to encourage investments in electric energy, increasing the potential of exploring sugarcane biomass -, encompassing bagasse, straw and plant tops –, the biodigestion of vinasse, which is yet another source being explored and is currently in an R&D process. The objective is to increase efficiency in this industry and actually make it possible to increase energy supply in a sustainable manner.

CPFL took the renewable energy assets it owned in CPFL Energia and combined them with those of ERSA Energia Renováveis, which exploited small hydroelectric plants, to create CPFL Renováveis.

By the end of this year, it will be operating almost 700 MW, of which a considerable percentage is installed in the sugar-based energy industry, in the form of a plant in operation in partnership with Usina Baldin, of Pirassununga, and four other business projects that will come on stream still in 2011, representing an investment of almost R$ 1 billion. Our plans foresee that by the end of 2012, we expect to attain an installed capacity of 906 MW.

By 2020, CPFL plans to invest R$ 4.5 billion, specifically in the production of energy from biomass. CPFL operates PCH (small hydroelectric plants) with 278 MW of capacity, 160 MW from biomass, and 210 MW from wind energy.

There are projects under construction totaling 20 MW in PCH energy, 170 MW from biomass, and 296 MW from wind energy. In a study phase there are PCH projects totaling 508 MW, 1,361 MW from biomass, and 1,472 MW from wind power. The overall total, involving all projects, amounts to 4,375 MW.

Previously, CPFL’s policy was to buy energy from plants, warranting long-term PPAs. With the money from such PPAs and the guarantee of a 20-year energy contract, CPFL was able to source funds from the BNDES (Brazilian nacional foment bank), and to make the necessary investments in equipment, crushing and agriculture, to have the energy available.

In 2007, CPFL began exploring this segment in a different manner, being more than just a partner, and began investing in the industry, looking for plants interested in CPFL investing in the cogeneration business, modernizing equipment, and using energy to make the investment profitable. In 2008, the first project materialized and is currently in operation.

Better use of bioelectric potential is hindered in 3 critical ways: 1. Lack of knowledge on how the industry operates, given that it is impossible to have a team dedicated to energy management, even considering the complexity of the electric industry’s regulations and the ways in which energy is marketed. 2. The decision to invest in cogeneration directly competes with investments in the production of sugar and ethanol. 3: Connection to the system: connection costs tend to increase ever more, given that the plants are farther away from transmission lines.

There is a free market in which one can market energy in a more competitive manner, with shorter term contracts, but it is difficult for an alone-standing plant to accomplish, given the specific knowledge required in this matter. If the plant is a player that has generation and a number of energy sales contracts, it will be exposed to the non-generation risk.

However, if the plant takes part in a large energy generation system, it will start to diversify this risk, mitigating the problems and making more projects feasible. The idea of partnering is to concentrate investments and risk management in a specific electric industry management company, which will have to be identified.

When one works according to a scale, setting up a 50km, 138KV transmission line, exporting energy only during the 6-month harvest period, then in fact this is an investment with inadequate returns, because too much capital is employed for too little energy. However, when the investment increases the use of biomass, joining efforts and increasing performance conditions, the return on investment is made feasible.

This partnership is interesting to the extent that CPFL invests in boilers and turbines, modernizes its energy generating industrial park and cogeneration, while the plant concentrates its attention specifically on the production of sugar and ethanol, receiving energy and steam needed for its production and making the surplus available to render the investment profitable.

CPFL will manage the operation so as to optimize energy generation, investing in equipment in the plant, improving capacity and reducing steam consumption, maximizing energy exports. Since it can better manage the time of sale, not necessarily resorting to auctions, it can more easily market this energy, the plant becomes profitable, celebrating contracts for operating and maintaining the plant, it shares its own surplus energy, and it can reap more benefits from the cogeneration operation.