annual report 2017

QUANTUM

Created in 2017, Quantum is responsible for our power transmission line operations in Brazil. In 2015, we joined the Spanish group ACS, through its subsidiary CYMI, for joint investments to build four concession projects of high-voltage power transmission lines and substations. In 2016, we expanded our presence by securing other three lots, through a public auction held by ANEEL – Brazilian Electricity Regulatory Agency. Currently, the seven projects total 4,310 km of transmission lines, in addition to the construction of 13 new power substations and expansion of another 27 distributed throughout the Northeastern and Southeastern regions of Brazil. Investments will reach BRL 9 billion by 2022. With projects already in operation, and gradual delivery of others planned, Quantum has assumed its place as one of the largest power transmission companies in Brazil.

The first 522 km of transmission lines under our concession were delivered in 2017. There were 251 km between the states of Rio Grande do Norte and Ceará (Esperanza Project), which received investments of approximately BRL 530 million, and other 301 km in the State of Bahia (Odoyá Project), with funds of a little over BRL 570 million.

In the case of the Esperanza Project, we had already obtained authorization to receive 100% of the Allowed Annual Revenue (RAP). In Odoyá, we obtained authorization in 2017 for 96% of the RAP and expect approval for the remaining 4% in early 2018. The Allowed Annual Revenue is the compensation model used in Brazil for lines in operation, and is defined at the end of auctions for projects, adjusted by inflation during the term of the concessions. It eliminates any fluctuations resulting from demand and/or energy prices.

Throughout the year, we also completed our entire long-term capital structure for the two projects, with financing via BNDES and the issuance of debentures, classified with an AA+ rating by the Fitch agency.

 

OUTLOOK

Quantum’s main goal for 2018 is to deliver other 1,144 km of power transmission lines, 241 km of which refer to the Esperanza Project between the states of Ceará and Rio Grande do Norte and 903 km referring to the JMM Project between the states of Bahia and Piauí, for a CAPEX of almost BRL 1.6 billion. In parallel, Quantum will incorporate 100% of the capital from the Odoyá and Esperanza power transmission concessions, which together total 793 km of transmission lines and seven high-voltage substations.

Brazil has about 135,000 km of transmission lines, 70,000 of which were granted by the Brazilian Electricity Regulatory Agency (ANEEL) as of 1999.

According to data published by the Energy Research Office – EPE (associated with the Brazilian Ministry of Mines and Energy), approximately BRL 119 billion will be invested between 2017 and 2026 in 62,000 km of new lines. The investments are related to the need to connect new hydroelectric plants and wind and solar energy plants that have been built, especially in the Northern and Northeastern regions of the country. In recent years, ANEEL has been holding two to three auctions annually for transmission-line concessions and Quantum will continue to monitor future opportunities attentively to expand its national network.

POWER TRANSMISSION LINES