CPFL sees Desa deal done soon

Brazilian renewables company CPFL Renováveis expects to conclude the acquisition of Desa by the beginning of the fourth quarter, which will add 250MW of operational wind farms to its 797MW portfolio, said the company's CEO André Dorf.

“We are concluding due diligence and audits and should be reaching the final steps of the acquisition which would also include aligning corporate governance,” said Dorf during a conference call to discuss the company's results for the second quarter of 2014.

Additionally, CPFL would assume control of another 29MW of wind farms being built by Desa. CPFL announced the acquisition in the first quarter of 2014 and since then has been taking steps to conclude the deal.

CPFL's growth strategy is based on mergers and acquisitions in wind and other renewable energy technologies, which have impacted positively on its results in the first half of 2014 after concluding in March the acquisition of Rosa dos Ventos and 13MW in wind power assets.

In second quarter of 2014, CPFL Renováveis' revenue rose 31% to R$245m ($108m) from R$186m in the same year-ago period. The increase was due to higher power sales from an operational portfolio that increased 29%. Wind power, which accounts for 45% of net power sales, rose to 341MWh between April and June, up 107% from 164MWh in the same period a year ago.

Aside from new revenue from Rosa dos Ventos, the company also started commercial operations of the 120MW Atlantica and 188MW Santa Clara complexes.

Revenue would have been higher if the 78.2MW Macacos I and 157.5MW Campos dos Ventos II, whose construction was concluded, had already been connected to the grid.

Located in the northeastern state of Rio Grande do Norte, these two complexes are standing idle waiting for the conclusion of connection works. The grid link is expected to be ready by the end of October, according to data from Brazilian power regulator Aneel.

CPFL Renováveis posted an Ebitda of R$117m in the second quarter of 2014, up from R$98.6 a year ago. The company posted a net loss of R$65.8m, which compares with R$51.6m loss by the same comparison.

Expenses rose in the second quarter due to the acquisition of power in the spot market and the renewal of guarantees for some of its wind power assets, as well as on-going investments and debt payments, which offset the higher revenues from increases in operating capacity, said Marcelo Souza, the company's CFO.

CPFL spent R$64m to buy power in the spot market in order to compensate dry reservoirs of its hydroelectric plants because of a nationwide drought that has been affecting Brazil.

The company is currently investing in the construction of two new wind projects: the 231MW São Benedito/ Campos dos Ventos and the 51.3MW Pedra Cheirosa projects. The first be ready from 2016 and has signed 20-year PPA contracts, while the second sold power, also for 20 years, in the A-5 auction last year and should be ready in 2018.

Although the company has a portfolio of 3.8GW in wind, solar (600MW), small-scale hydro and biomass projects and has listed some of it in Brazil's two upcoming auctions, it will only commit to sell power if minimum returns are guaranteed.

“We still don't have price cap indications, so we are waiting for more information,” said Dorf. “We are very disciplined in appraising opportunities and we focus on generating value rather than growing installed capacity."