China’s State Grid won a concession on Friday to build and operate the second power transmission line to connect the massive Belo Monte hydropower plant to the national Brazilian grid.
Belo Monte’s second line will be Brazil’s longest, stretching 2,500 kilometers from the hydroelectric complex in northern Para state in the Amazon jungle to southeastern Rio de Janeiro.
The Chinese state-owned company, which had already won the concession for the first line in 2013, bid against Spain’s Abengoa in the auction for the project estimated to cost 7 billion reais ($2.21 billion).
According to the auction’s rules, the company who offered to collect the smallest annual amount on tariffs would win.
State Grid’s bid was for a total charge of 988 million reais per year, 19 percent below the maximum allowed.
Abengoa’s bid was for 1.049 billion reais per year, a 14 percent discount.
Brazilian power sector watchdog Aneel considered the auction successful, given Brazil’s current financial situation of tight credit.
“Few companies have the capacity to participate in an auction such as this, due the size of the project. So, to have three companies participating can be considered a success,” said Aneel’s director José Jurhosa Jr.
Brazil’s state-controlled utility Eletrobras was also registered in the auction through its subsidiaries Eletronorte and Furnas, but declined to present an offer.
State Grid’s vice president for operations, Ramon Haddad, said the company plans to use all available credit from Brazil’s state development bank BNDES and other financing options such as local infrastructure notes.
BNDES said it could finance up to 50 percent of phases of the project.
“We are also open to talk to other companies, looking to add partners to this work,” Haddad said.
The project should be complete at the end of 2019.
Haddad sees difficulties related to environmental licensing since the line will cross a large rainforest area.
“The length is 2,500 kilometers, so I expect to have 2,500 problems,” he said.Environmental licensing has been a big hurdle for infrastructure projects in Brazil, particularly in the northern Amazon region of the country.
The Belo Monte dam on the Xingu River, despite being considered crucial by the government to guarantee future power supply, has met strong opposition from environmentalists including “Avatar” director James Cameron as well as from indigenous tribes.
Protests have contributed to frequent delays of the project, now expected to be operational by 2019.