After reaching an agreement with Brookfield Renewable Energy for the sale of nine solar plants in Ceará, Newen, the second-largest winner in new energy auctions for solar power, is prioritizing the construction of a new cluster of projects in Minas Gerais. The company plans to invest a total of R$1.5 billion in projects that will have 100% of their output contracted in the free market, either through bilateral agreements or energy self-production models.

Founded in 2014 and controlled by Brazilian construction company Steelcons, Newen specializes in the development of solar projects. Over the past five years, the company has negotiated the supply of 16 solar plants in the states of Ceará and Bahia through regulated auctions, totaling 472 MW of installed capacity. This performance in federal government-organized auctions is only surpassed by Italy’s Enel Green Power.

With 4,000 MW of projects in the Northeast and Southeast at various stages of development, Newen plans to market this output in regulated auctions and the free market. For the northeastern plants, due to the risk of price differences between submarkets, the priority is to sell to distributors, although negotiations with large consumers are also on the table. “In the Southeast, the energy will be 100% allocated to the free market and self-production,” said Newen’s president, Rodolfo Toni.

This is the case for the projects in Minas Gerais. The company plans to build a 600 MW capacity cluster in the municipality of Janaúba. Without disclosing names, Toni revealed that the generator has already signed its first energy purchase and sale contract in the free market for projects totaling 200 MW, and has a signed memorandum of understanding for the implementation of another 100 MW in the self-production modality.

The remaining 300 MW will be constructed under a business model known as “merchant,” meaning the generator accepts the risk of building a plant without having energy sale contracts. In this format, the company’s energy trading arm, Newen Soluções em Energia, will seek buyers in the market for the project’s output.

“The contracts for the other 300 MW, which have better prices than those negotiated for the Alex solar park (around R$118/MWh), will generate enough cash flow to support investments in the merchant plants,” stated Toni. In the company’s strategy, 50% of the R$1.5 billion will come from development banks, 30% from infrastructure debenture issuance, and the remaining 20% from the company’s own capital. The 600 MW of the new cluster are expected to start commercial operations by mid-2022.

According to Toni, the financial modeling designed for the new cluster in Minas Gerais aligns with the current context of the Brazilian electricity sector. He noted that banks are now willing to finance projects without long-term sales contracts, unlike in previous years. “Institutions are already working with a Support PLD concept, with values ranging from R$90/MWh to R$110/MWh,” he said. The Price for Liquidation of Differences (PLD) is used as a benchmark for contracts in the free market.

Newen views its specialization in solar energy projects as a competitive advantage with the upcoming implementation of hourly PLD, expected to take effect in January 2021. This is because the trend is for spot energy prices to rise during the day when electricity consumption peaks, which coincides with the highest production period for solar energy. “At night, when there’s no solar generation, we buy energy from other sources at a lower cost,” the executive argued, highlighting the importance of the company’s trading arm, which was established last year.