Strategic Study

Utility Scale – Brazilian PV Market 2019

Revision: December 2018

Brazil
 O evento de Estruturação e Investimentos em Grandes Usinas Solares
YY
10 e 11 de junho,São Paulo

Modelagem Riscos Regulatório PPA’s Financiamento Novas Tecnologias

Geração Distribuída Mercado Livre Leilões

What we do?

Consultancy and audit for DG business models, implementation and risk mitigation.
Helping developers and invertors of PV projects in mini-generation and rental power plants.

Distributed Generation

Step Step Step Step Step

0 1 2 3 4
Simplified Development Procurement Implantation M&A
Business Plan Validation Consultancy Audit Advisory
What we do?

Modeling and structuring PV projects to Free Market and Regulated Market

Utility Scale

Step Step Step Step Step

0 1 2 3 4
Development Project Finance Procurement Implantation M&A
Consultancy Validation Consultancy Audit Advisory
Introduction

This Strategic Study developed by Greener aims to evaluate the current market development regarding
contracted Large Scale PV Projects in Brazil. This Study also creates references for current and future
projects according to the Market dynamics and the impact on the projects’ profitability.

Main points of the Study:

OPPORTUNITIES IN
THE
UTILITY SCALE ENERGY PRICING SCENARIOS FOR
PROJECTS STATUS MACROECONOMIC
PHOTOVOLTAIC SCENARIOS FREE MARKET
DYNAMICS
MARKET
Summary

1 Evolution of Projects contracted in the Auctions of 2014, 2015, 2017 and 2018
2 Utility Scale PV Market Opportunities
3 Contracted Projects’ Profile
4 Market Share and Equipment Ranking (PV Modules, Inverters, Structures, EPC)
5 Hypothetical Case: 240 MWp/ 180 MWac PV Power Plant
6 CAPEX structure for a 240 MWp/ 180 MWac PV Power Plant
7 PV Modules: How the future prices impact the projects profitability?
8 Free Market: How the prices impact project IRR?
9 Scenarios of 2020, 2021 and 2022 for deployment of PV Power Plants
10 Best bid simulation for 6% net return
11 Greener Insights
ANEEL'S AUCTIONS
Status of the Contracted Projects
Auctions Timeline

6th LER* 7th LER 8th LER 25th LEN** A-4/2017 27th LEN A-4/2018

2014 2015 2016 2017 2018

First ANEEL’s Auction 2,171.3 MWp were The 2 Reserve Energy New Energy Auction A-4 New Energy Auction A-4

for solar source. 744.9 contracted in two Auctions announced for in December/2017. in April/2018. 1,032.5

MWp were contracted. Reserve Energy 2016 were cancelled. 790.6 MWp of PV were MWp of PV were
Auctions. No new projects of contracted. contracted.
solar source were
contracted.

* LER – Leilão de Energia de Reserva ( Reserve Energy Auction ) **LEN – Leilão de Energia Nova ( New Energy Auction )
Summary of ANEEL Reserve Auctions

6th Reserve Energy Auction 7th Reserve Energy Auction 8th Reserve Energy Auction
(2014/Oct-31) (2015/Aug-28) (2015/Nov-13)
Contracted Power Contracted Power Contracted Power
(MWp)
744,9 (MWp)
1.057,2 (MWp)
1.114,1

Contracted Power Contracted Power Contracted Power

(MWac)
612,8 (MWac)
822,1 (MWac)
931,0

Average Sale Price Average Sale Price Average Sale Price

(R$/MWh)
R$ 215,12/MWh (R$/MWh)
R$ 301,79/MWh (R$/MWh)
R$ 297,75/MWh

Average Sale Price Average Sale Price Average Sale Price

(US$/MWh)
US$ 87,80/MWh (US$/MWh)
US$ 85,98/MWh (US$/MWh)
US$ 78,77/MWh

Exchange Rate R$ 2,45/US$ Exchange Rate R$ 3,51/US$ Exchange Rate R$ 3,78/US$

Start of Energy Supply 01/10/2017 Start of Energy Supply 01/08/2018 Start of Energy Supply 01/11/2018

Capex* Average Capex* Average Capex* Average

(R$/MWp)
R$ 3.953.660,56 (R$/MWp)
R$ 4.162.392,44 (R$/MWp)
R$ 3.940.245,77

Capex* Average Capex* Average Capex* Average

(US$/MWp)
US$ 1.613.739,00 (US$/MWp)
US$ 1.185.866,79 (US$/MWp)
US$ 1.042.393,06

*CAPEX reported in auctions registration at EPE, not the execution price. Source: ANEEL, CCEE, EPE.
Summary of ANEEL New Energy Auctions

25th New Energy Auction 27th New Energy Auction

(2017/Dec-18) (2018/Apr-04)
Contracted Power (MWp) 790,6 Contracted Power (MWp) 1.032,547

Contracted Power (MWac) 574,0 Contracted Power (MWac) 806,6

Average Sale Price Average Sale Price

(R$/MWh)
R$ 145,68/MWh (R$/MWh)
R$ 118,07/MWh

Average Sale Price Average Sale Price

(US$/MWh)
US$ 44,28/MWh (US$/MWh)
US$ 35,46/MWh

Exchange Rate R$ 3,29/US$ Exchange Rate R$ 3,33/US$

Start of Energy Supply 01/01/2021 Start of Energy Supply 01/01/2022

Capex* Average (R$/MWp) R$ 5.422.069,07 Capex* Average (R$/MWp) R$ 5.111.329,66

Capex* Average (US$/MWp) US$ 1.648.045,31 Capex* Average (US$/MWp) US$ 1.534.933,83

*CAPEX reported in auctions registration at EPE, not the execution price. Source: ANEEL, CCEE, EPE.
 Probability of Project Completion

Completion
High/In operation Medium Low No probability De-contracted
Probability**
1,057.2 1,114.1
1,035.4 23,0 1,002.3 4,920.7 High/In operation
30,2 290,5 109,1 • In operation
290,5 36,1 • Investor-backed
711.6
36,1 1361,3 • EPC contracted
78,9
• Equipment Suppliers Contracted
MWp*

38,2
230,0
1057,2 1091,1 967,5 Medium
• Investor-backed
670,6 3232,7 • Contract with Suppliers (not
481,6 necessarily)

34,8 Low
6TH RESERVE 7TH RESERVE 8TH RESERVE 25TH NEW 27TH NEW CUMULATIVE • Nothing set
ENERGY AUCTION ENERGY AUCTION ENERGY AUCTION ENERGY ENERGY AUCTION
OCT/2014 AUG/2015 NOV/2015 AUCTION APR/2018
DEC/2017 No Probability
• Nothing set but timely

*MWp, correspondent to the module output peak power. **Up to date in November 2018.
 Projects Completion Expectation
Regarding PV Projects contracted in 2014, 2015, 2017 and 2018.

High Probability Medium Probability Low Probability No Probability

Classification of
New Auctions are key to keep
the pipeline of future projects!
Projects**
High Probability/In
36,1 Operation
?
• In Operation
30,2 • Investor-backed
163,8 • EPC contracted

?
• Equipment Suppliers Contracted
MWp*

Medium Probability
.

1.228,6
1.044,4
? •
•
Investor-backed
Contract with Suppliers (not
967,5 necessarily)
866,0
79,0
Low Probability
230,0 • Nothing set

93,7
No Probability
• Nothing set but timely
2017 2018 2019 2020 2021 2022

*MWp, correspondent to the module output peak power. **Up to date in November 2018.
 Projects in Operation,Test or Construction
Regarding PV Projects contracted in 2014, 2015, 2017 and 2018.

364.9 MWp 787.6 MWp

162.0 MWp 274.9 MWp

127.6 MWp 188.8 MWp

125.4 MWp 156.5 MWp
6.1 124.0 MWp
MWp

687.0 MWp 877.2 MWp

635.2 MWp 650.3 MWp

171.0 MWp 273.6 MWp

Cumulative Capacity* up to 2018 Completion Expected* up to 2019

(2,273.0MWp) (3,235.6 MWp)
Projects in Operation, under test or Construction Projects under Construction
*Up to date in November 2018.
 Project Overload
Overload

Definition
Overload Histogram of the Contracted Projects Relation between DC power and AC
power of the Power Plant.

Usage
Increase the power generation with
low CAPEX raise.
% Projects

Ideal Overload
There is no ideal Overload. Each
project must seek the best balance
between DC and AC power according
to its IRR. It is observed that a
significant portion of the contracted
projects obtained an Overload
between 20% and 40%.

Overload (%) [MWp/MWac]

 Capacity Factor
Capacity Factor (%)

CF (Capacity Factor) Histogram
of the Contracted Projects
Definition
Relationship between the amount of power
generated by the power plant according to its
potential of generation (if the power plant
operates 100% of the time under maximum
capacity).

Usage
% Projects

Comparison between power plants in different

locations and/or with different technologies.

Ideal CF
There is no ideal CF, but the higher CF, the
greater is the power generated (often without
a high increase in CAPEX). Evaluate sites of
greater productivity and use technologies that
increase the generation and/or reduce losses
CF (%) in the power plant. Those measures are key to
achieve more profitable projects.
BUSINESS
Opportunities in the Brazilian Utility Scale PV Market
Introduction
The first solar power plants in Brazil are operating, and there are many being constructed, creating many opportunities for various sectors of the PV
chain.
This report points out business opportunities for projects contracted in the 5 auctions in 2014, 2015, 2017 and 2018 considering its development
stages.

PV Plants which
High PV Plants PV Plants PV Plants under has
Probability/ in Operation under Test Construction Not Started
In Operation Construction
Opportunities to buy assets. Opportunities for Operation & Opportunities for Owner's Opportunities for secondary
Maintenance services. Engineering and Certification suppliers and outsourced
services. services.

PV Projects
Medium without PV Projects with medium probability have not contracted the EPC and
EPC contract and there may be opportunities for various services and equipment suppliers.
Probability
Suppliers*

PV Projects with
Low Low probability PV Projects have not defined their suppliers, not contracted EPC and, in
no Investors,
Probability EPC or Suppliers
particular, have not yet signed an investment agreement/contract for the plant construction.
Project Status
Regarding PV Projects contracted in 2014, 2015, 2017 and 2018.

Operation Testing Construction High Probability – Not Initiated Medium Probability Low Probability No Probability

1,228.63

1,044.40 1,065.86
36,1 997.70
80
163,8 30,23
5,95
MWp

1.228,63
964,4 402.78 967,47
860,01
78,99

230,05

93,74
2017 2018 2019 2020 2021
Opportunities
Regarding PV Projects contracted in 2014, 2015, 2017 and 2018.
PV Projects status and its financial impact in the chain.

High Medium Low

Probability Probability Probability

2,193.0 MWp Projects without 1,361.3 MWp Projects with no 36.1 MWp
In Operation R$ 7,269 EPC contract and R$ 3,383 Investors, EPC or R$ 104
Million Suppliers* Million Suppliers Million

80.0 MWp Assumptions

Under Test R$ 253 No
Million Year CAPEX Probability
2017 R$ 3,44/Wp
Projects with no
860.0 MWp 2018 R$ 3,16/Wp 109.2 MWp
Investors, EPC or
Under Construction R$ 2,485 Suppliers but with time R$ 278
2019 R$ 2,89/Wp Million
Million enough for completion
2020 R$ 2,60/Wp
2021 R$ 2,39/Wp
99.7 MWp
Construction Not
R$ 260
Started
Million
Investments
Regarding PV Projects contracted in 2014, 2015, 2017 and 2018.
Financial projections of the Utility Scale PV market according to the pipeline presented previously. It was considered that investments will be
demanded during the year of completion.

1,228.6 MWp

1,044.4 MWp
1,065.9 MWp
MILLIONS R$

997.7 MWp

R$ 4.221,57
R$ 3.300,31 R$ 3.080,35
402.8 MWp
R$ 2.384,50

R$ 1.047,22

2017 2018 2019 2020 2021

Investments
Regarding PV Projects contracted in 2014, 2015, 2017 and 2018.

Operation Testing Construction High Probability – Not Initiated Medium Probability Low Probability No Probability

1,228.6 MWp

1,044.4 MWp
1,065.9 MWp
R$ 252,80
R$ 104,33
MILLIONS R$

R$ 473,38
997.7 MWp
R$ 17,20
R$ 72,24
R$ 4.221,57

R$ 3.047,51
R$ 2.485,44 402.8 MWp R$ 2.312,26
R$ 205,37
R$ 598,12
R$ 243,73
2017 2018 2019 2020 2021
 Status of Projects
The following analysis refers to the operational, testing or under construction PV Projects, addressing some themes regarding the total capacity
contracted (excluding the rescinded contracts) and the market share of the main equipment and services.

Status of Projects

6th 76% of the contracted capacity in the

6% LER Auction are in Operation, Testing, or
De-contracted under Construction.
(290.50 MWp)
32% 7th 100% of the contracted enterprises in
LER the Auction are in Operation, Testing, or
Operation, Testing, under Construction.
or Construction 5,029.9 MWp
(3,133.04 MWp) 8th 97% of the contracted enterprises in
LER the Auction are in Operation, Testing, or
Construction Not under Construction.
Started 62% 25th 49% of the contracted enterprises in
(1,606.33 MWp) LEN the Auction are in Operation, Testing, or
under Construction.

27th 3.4% of the contracted enterprises in

LEN the Auction are in Operation, Testing, or
under Construction.*

* The deadline for the projects completion of the 25 th and 27th LEN has not yet expired, which implies a low enterprises completion rate.
 Funding Sources
The Brazilian Public Development Banks, BNB and BNDES, play a key role supporting more than 60% of the plants in operation, construction
or testing stages.

Funding Sources*

BNB
(38 Projects)
30% BNB: Banco do Nordeste (Bank of
BNDES
(18 Projects) Northeast)
42%
BNDES: Banco Nacional do Desenvolvimento

International Private 90 SPVs (National Bank of Development)

Funding SPV: Special Purpose Vehicle

(7 Projects)
Equity 8%
(27 Projects)
20%

*Up to date in November 2018.

 Photovoltaic Modules
Regarding PV Plants in Operation, Testing or Under Construction.

PV Modules Manufacturing
Price The Local assembled Modules are
1,06% substantially more expensive. In
general the price is between 35%
and 50% more expensive than
the imported module in same
Local
22,43% comparison basis.
(725.8 MWp)
Local Among the main modules suppliers
Imported Manufacturers for utility scale enterprises, only 3
(2475.7 MWp) have local manufacturing.
3,235.6 MWp

Undefined
(34.2 MWp) Availability The production capacity limits the
supply of modules for the
76,51% contracted PV Projects, one of the
main bottlenecks nowadays is the
delivery time, for both local and
international delivery.

Note.: Projects with signed contracts, but that are not under construction, were not accounted.
 PV Modules Technologies
Regarding New Technologies Sold up to 2018.

Bifacial
388 MWp
13,5%
9 MWp using Mono Perc modules
Mono Perc
and 390 MWp using bifacial.
9 Mwp
0,3% These are new technologies of
modules that are entering the
Brazilian Utility Market and can
increase investment’s return.

Thin Film
75 MWp
Poly 2,6%
2412 MWp
83,6%
Total: 2.9 GWp

Note.: Projects with signed contracts, but that are not under construction, were not accounted. Also, projects without technology information were not accounted
 Top PV Modules Suppliers - Brazil
Aneel’s Auction’s Projects in Operation, Testing or Under Construction up to 2018*.

2% 1% 1% 1º Jinko
(1124.0 MWp)

2º Canadian Solar
(621.0 MWp)

5% 3º BYD
(606.6 MWp)
7%
4º JA Solar
(263.3 MWp)
36%
9%
5º GCL
(220.3 MWp)

3,136 MWp 6º Chint

(166.8 MWp)

7º First Solar
(100.2 MWp)

19% 8º Longi
(34.0 MWp)

9º Trina
(25.0 MWp)
20%

Note.: Projects with signed contracts, but that are not under construction, were not accountted. *Accumulated volumes up to 2018
 Top 10 PV Inverters Suppliers - Brazil
Aneel’s Auction’s Projects in Operation, Testing or Under Construction up to 2018*.

2% 1% 1º GE
3% (1060.3 MWac)
2º Fimer
(407.4 MWac)
4% 3º Santerno
(240.0 MWac)
7% 4º SMA
(196.0 MWac)

42%
5º WEG
8% (195.4 MWac)

2,458 MWac 6º Ingeteam

(179.98 MWac)

8% 7º Sungrow
(103.8 MWac)

8º Huawei
(75.0 MWac)
9%
9º Power Eletronics
(60.0 MWac)
16%
10º Siemens
(30.0 MWac)

Note.: Projects with signed contracts, but that are not under construction, were not accounted. *Accumulated volumes up to 2018
 Structures
Regarding Projects in Operation, Testing or Under Construction up to 2018*.

Contracted Capacity Advantages • The use of single axis trackers

improves the power generation,
even in conditions of low
4% latitude (most enterprises in
6%
Brazil).
Single Axis Tracker • Reduce the accumulation of dirt
(2921.8 MWp) on the modules.

Fixed
(180.1 MWp) 3,236 MWp
Disadvantages • Greater complexity to assembly.
• Increase mechanical assembly
Undefined cost.
(133.7 MWp) • They occupy greater area due to
the greater spacing between the
90% tables (shading).

Note.: Projects with signed contracts, but that are not under construction, were not accounted. *Accumulated volumes up to 2018
 Top PV Structure/Tracker Suppliers - Brazil
Aneel’s Auction’s Projects in Operation, Testing or Under Construction up to 2018*.

3% 2% 1º Soltec
(1366.7 MWp)

3% 2º NEXTracker
3% (614.0 MWp)

8%
3º Convert Italia
(597.6 MWp)

4º STI Norland
(265.4 MWp)
43%
3,236 MWp 5º Artech
(102.6 MWp)

19% 6º Brafer
(100.72 MWp)

7º Nclave
(85.5 MWp)

19% 8º PVH
(72.0 MWp)

Note.: Projects with signed contracts, but that are not constructed or under construction, were not accounted. *Accumulated volumes up to 2018
 Top 10 EPC - Brazil
Aneel’s Auction’s Projects in Operation, Testing or Under Construction up to 2018*.

2% 1º Biosar
(629.8 MWp)

2º Prodiel
(540.8 MWp)
5%
3º Tozzi
6% 20% (387.8 MWp)

4º Enerray
7% (357.6 MWp)

5º SNEF
(325.4 MWp)
7%
3,236 MWp 6º WEG
(224.7 MWp)

17% 7º Motrice
(223.0 MWp)
11% 8º Grupo Cobra
(171.0 MWp)

9º Scatec EPC
12% 13% (162.0 MWp)

10º GRS
(72.0 MWp)

Note.: Projects with signed contracts, but that are not constructed or under construction, were not accounted. *Accumulated volumes up to 2018
DRIVERS
How Macroeconomic and other key drivers can affect
the PV Projects
Introduction
This chapter shows the impact of the main drivers on the viability and profitability of a PV Plant. A proper balance of CAPEX/OPEX, an optimal capital
structure and a realistic vision of the macroeconomic conditions have a direct impact on the project profitability. A proper evaluation of the scenarios
and the market trends can make a difference in a safe bid in the auctions.

Macroeconomics Technical Characteristics CAPEX Composition

2020, 2021 Productivity,

Scenarios
and 2022 Plant Location Grid
Connection
Selic Rate, Imported Modules Price Scenarios
Brazilian Economics Inflation,
Modules,
Exchange
Technologies Inverters,
Development
Banks, Private Structure Equipment and
Financing Cost Structure
EPC
Funding
OPEX,
Operation &
Free Market Exchange of
Pricing Maintenance
Prices Inverters
Macroeconomics
Scenarios
Understanding the impact of each driver:

Selic Rate Inflation (IPCA) Exchange Rate

(R$/USD)

Inflation is directly linked to the consumption

balance with the productive capacity of the
The Selic rate (basic interest rate in Brazil) is A significant part of the CAPEX is directly
country. When the inflation grows and the
an important reference for the definition of impacted by the exchange rate. For this
interests rate remains stable, the real capital
the PV Project capital cost. Lower reference reason, the currency fluctuation is often
gain is reduced.
rates tend to make the return on one of the main risks in the project
In general, with a booming economy the inflation
infrastructure investment more attractive. modeling and pricing strategy .
is higher, but in our scenarios, we considered a
inflation target set for 2020, 2021 and 2022. As
the economy activity is expected accelerate
again, we considered a higher Selic rate to
contain the excessive consumption and do not
reduce the real capital gain.
 Macroeconomics
Scenarios
Understanding the macroeconomic dynamics is fundamental for future projects, as well as knowing the correct “timing” to come up with the project.
Three scenarios will be evaluated throughout the study considering different moments for the power plants construction.

Scenarios 2020 2021 2022

8.00% 8.00% 8.00%

Selic (Boletim Focus Nov/2018) (Greener Scenario) (Greener Scenario)
(interest rate reference)

4.00%
(Boletim Focus 3.75% 3.75%
Inflation Nov/2018, inflation (Inflation target) (Inflation target 2021)
(IPCA) target)

R$ 3.78 R$ 3.78 R$ 3.78

Exchange Rate (Boletim Focus Nov/2018) (Greener Scenario) (Greener Scenario)
(R$/US$)

PV Plant Start and conclusion in Start and conclusion in Start and conclusion in
Construction 2020 2021 2022

Boletim Focus: Monthly Report published by Brazilian Central Bank.

Note.: It was considered that all the disbursement of the enterprise is made in the year of construction.
Capital Structure
Equity vs Debt
Another crucial issue is to understand the possible ways to compose the capital structure. We will evaluate a possible scenario of financing provided by
development banks, where 60% of the CAPEX is financed.

Development
Bank

Invested
Capital
(100%)

Equity Financing
(Development bank
(Own Capital) Funding)

40% 60%
Financing
Private vs Development Bank
A different mechanism of financing can be through Private Funding. Although we don’t show any simulation for this type, below we show the main
difference between each. What is the difference between the two capital structures and what are they for?

Private Funding Development Bank

The capital structure with private resources

(banks, funds, etc) is an alternative for those
investors who do not wish to make 100% of
the contribution in order to reduce the
contribution of capital. A financing
operation generally increases the Cost of
Capital (WACC) of the project and does not
offers flexible conditions for payment if
compared to a development bank. However
the financing operation reduces the
contribution of the investor.
The capital structure with development
banks aims to reduce the Weighted
Average Cost of Capital (WACC), leveraging
the operation with a cheaper capital and
with an extended amortization period.
Development banks have requirements
regarding the project's documentation.
Also, the amount borrowed must meet the
minimum percentage of local content.
Funding Conditions
Development Bank

Scenarios 2020 2021 2022

Opportunity Cost 9.5% 9.5% 9.5%

(%/y)

Equity (%) 40% 40% 40%

Debt (%) 60% 60% 60%

Interest Rate (%/y) 6.27% 6.02% 6.02%

Period 18 years 18 years 18 years

Grace Period 3 years 3 years 3 years

Free Market Conditions
Pricing in Free Market PPA

R$ 220/MWh

R$ 180/MWh

The PPA in the Free Market (FM) is

structured with a decreasing price over the
years. For this reason, the first year of

1st operation in FM was simulated with a price

of R$ 220.00/MWh and of R$ 180.00/MWh
2nd for the second. In the scenario of only one
year in FM the price is for R$ 220.00 for this
single year.

1st Year in Free Market 2nd Year in Free Market

Technical Characteristics
Understanding the impact of each driver:
Plant Location
The choice of the power plant location
should be associated with some
fundamental factors to ensure the success
of the project. Among the main
considerations, a good PV Project should be
located in an area with good solar radiation
and favorable grid connection (preferably a
few kilometers away from the substation
and at the lowest possible voltage level)
and the area should have environmental
approval.
Technologies
The selection of power plant technologies
will affect the project competitiveness.
A proper choice of the modules technology
(crystalline, thin film, bifacial), as well as
the inverters (central, string or skid) and
the structure (fixed or with tracker) will
influence the project CAPEX, productivity,
required land and O&M cost.
Operation and Maintenance
Beyond the impact of the technologies in
the Operation & Maintenance cost, other
factors are crucial to guarantee an efficient
O&M cost. The frequency of cleaning should
be considered, as well as the availability of
hydric resources, scale of the power plant
for dilution of the fixed costs and concerns
about the plant security .
Technical Characteristics
Plant Location
The location where the PV Plant is developed and installed is one of the key factors for the viability and attractiveness of the Project.

Productivity
Locations with high productivity are always preferred for deployment of PV
plants, however the availability of grid connection must be first evaluated,
followed by the potential environmental restrictions.

Grid Connection
The Grid access has been a major bottleneck for the development of projects in
Brazil. Significant part of the distribution and transmission networks of the
northeast regions are overloaded (region with high solar irradiation), with no
availability of energy transmission, which often makes the project unfeasible.

Environmental Licensing
Environmental licenses can take a long time in a bureaucratic process, if not
properly prepared its can be easily denied by State organs.
Technical Characteristics
Technology
The technology for a project must take into account not only its initial investment, but also its secondary gains and long term costs. Remember that the
technology adopted in the project will remain for more than 20 years.

PERC Bifacial Central String Fixed Tracker

Perc technology is a new Bifacial technology Central inverters have String Inverters are The fixed structure is the Although the higher costs

architecture of a sillycon exposes both front and been the most used becoming a competitive option with lower initial (initial and operational), the

cell. Can be mono or poly back sides to light. This topology in Utility Scale PV technology and important costs as well as during energy production increase
crystalline. The perc way the technology can plants as they’re cost option for large size plants. the operational period. can be significant even in
technology can enhance significantly increase competitive at the moment Its great advantage are the low-latitude regions.
module power up to 420 module power output, of the initial investment. low operational costs, as
Wp and is expected to specially in fields with they allow a fast
account for a 40% share high rear light incidence. replacement in case of
in the coming years. Bifacial modules can also failure, requiring less

be made with perc cells. specialized technicians.

Technical Characteristics
Operation and Maintenance
Operation and maintenance is crucial to the profitability of the enterprise. Its improper sizing can create risks to assets or jeopardize the power plant
productivity.

It is essential to evaluate the availability of water resource at the power plant location. An PV
Plant uses a significant amount of water for cleaning the modules, specially in dry areas where
the resource is scarce.

The PV plant are usually located in remote places and have fragile and vulnerable equipment
which may be vandalized. An adequate monitoring and security are important and can increase
the operation and maintenance costs significantly.

Production loss by dirt/dust can be significant, especially in arid regions. An efficient plan for
cleaning the modules is important.
CAPEX Composition
Operation and Maintenance
Understanding the impact of each driver:
Local Modules
Local manufactured modules are an
option for the current and future
entrepreneurs in the sector. As the
costs are 35% to 50% higher than the
imported modules, the PV projects
using local modules requires favorable
financing conditions provided by
development banks.
Imported Modules
Used by most Utility Scale Projects,
imported modules feature
substantially lower costs than the local
modules, however they limit or
prevent access to resources of
development banks.
The strong rise in current market
prices draws special attention, as
well as limitations on availability
reported by some entrepreneurs.
Cost Structure
The modules represent the main
component in the range of CAPEX costs.
The recent volatility as well as the
uncertainties in the international PV chain
makes the cost projection of this
component an important risk factor. The
CAPEX is mostly exposed to Exchange Rate
variations.
CAPEX Composition
Hypothetical Case Study: 240 MWp/180 MWac PV Power Plant
To understand the impact of module costs in a PV Plant, a CAPEX composition for a hypothetical project will be presented.

DC Power: 240 MWp

AC Power: 180 MW
Modules: Polycrystalline 345 Wp
Inverters: Central 2,5 MW
Structure: Single Axis Tracker +55°/-55°
Connection: 10 km Line at 230kV, connection to 230 kV
Bay
Substation: 6 smalles substations and a central, with
central power transformer.
Power plant: 6 solar fields of 30 MW.
 CAPEX Composition
CAPEX Structure 240 MWp/180 MWac PV Plant - 2019

Values in R$/Wp Imported Module %

PV Modules 1.08* 35.43%

Inverters (R$/W) 0.25 6.14%

Tracker 0.61 21.84%

Substations 10.31%
(6 smaller and one central, without 0.29
transformer)
Central Transformer 0.03 0.93%

Transmission Line 0.20 7.18%

Works and Engineering 0.30 10.77%

Management 0.08 2.87%

Development 0.01 0.22%

Others 0.12 4.31%

TOTAL( R$/Wp) R$ 2.891

* Modules with REIDI (Regime Especial de Incentivos Para o Desenvolvimento da Infraestrutura, Special Regime of Incentives for Infrastructure Development).
CAPEX Composition
CAPEX 240 MWp/180 MWac Power Plant - All Scenarios
What are the expected prices for CAPEX composition with imported modules in the evaluated scenarios?

Scenarios 2020 2021 2022

CAPEX
2.602 2.394 2.274
(R$/Wp)

Exchange
(R$/US$) R$ 3.78 R$ 3.78 R$ 3.78
ENERGY PRICING
Scenarios for a hypothetical 240MWp/180 MWac PV Plant
Introduction
This chapter aims to demonstrate the scenarios for 2020, 2021 and 2022 for a hypothetical New Energy Auction A-4 during 2019

The energy prices are hypothetical as they can vary significantly according to the project’s Capital Structure and the investor return and
risk profile.

Scenarios
2019 2020 2021 2022 2023

2 Years in New Energy Construction Free Market Free Market Regulated

Free Market Auction A-4. Market

1 Year in New Energy Regulated

Construction Free Market
Free Market Auction A-4 Market

Only Regulated New Energy Regulated

Construction
Market Auction A-4 Market
Boundary Conditions:
As presented previously, some premises will be reopened to compose the scenarios of the study. The macroeconomic conditions for the scenarios of
2020, 2021 and 2022 will be kept. The funding conditions presented will be addressed in the 3 Cases (one for each scenario), as well as the initial cost
composition (CAPEX) considering use of local modules and imported modules.

Assumptions The 240 MWp/180 MWac PV Plant

Economic 2020, 2021,

Scenarios 2022

Costs
Imported
Composition
CAPEX Modules

Financial Development
Fundraising Banks
The 240 MWp/180 MWac Power Plant
Location
The Plant location considered for the simulation is in the state of Ceará, 10 km from the Sobral substation. We consider the substation has capacity to
receive the power flow

Sobral CE Sobral CE

SPH

Radiation in Ceará Transmission lines in Ceará

The 240 MWp/180 MWac Power Plant
The following PV Plant configuration will be used in Study Case for the pricing models.

40 MWp
30 MW Technical Characteristics

• Modules: Polycrystalline 345 Wp

40 MWp
• Inverters: Central 2,5 MW
30 MW
• Structure: Single Axis Trackers of -55°/+55°
240 MWp • Grid Connection: 230 kV
40 MWp
30 MW • Transmission Line: 10 km in 230 kV
• Power plant: 6 solar fields of 30 MW
40 MWp • DC Power: 240 MWp
30 MW • AC Power: 180 MW
180 MWac
• Overload: 33,3%
40 MWp • Inverters exchange: year 12 (20,5 Million R$)
30 MW

40 MWp
30 MW
The 240 MWp/180 MWac Power Plant

Generation Characteristics
40 MWp • Productivity: 2.200 kWh/kW /year
30 MW
• (considered the tracker gain)
• Capacity Factor: 25.11%
40 MWp
• Generated power/year: 233,640 MWh/year
30 MW
• Electrical Loss: 3,5%
240 MWp • Modules degradation year 1: 2,5%
40 MWp
30 MW • Modules degradation coming years: 0.85%/year

40 MWp Other Features

30 MW
180 MWac • Operation and Maintenance: 1.50% of CAPEX a year.

40 MWp • Administration costs: 0.10% of CAPEX /year.

30 MW • Insurance costs: 0.10% of CAPEX /year.
• Taxes regime: Assumed Profit
40 MWp • Contract Duration: 20 years (+Free Market in 2 cases)
30 MW
The 240 MWp/180 MWac Power Plant
240 MWp/180 MWac PV Plant using imported modules and financed by development bank, according to the assumptions presented previously.

Macroeconomic Assumptions

Scenarios 2020 2021 2022

Selic 8.00% 8.00% 8.00%

Inflation (IPCA) 4.00% 3.75% 3.75%

Exchange Rate (R$/US$) R$ 3.78 R$ 3.78 R$ 3.78

Construction & Start and conclusion in 2020 Start and conclusion in 2021 Start and conclusion in 2022
Startup

CAPEX Assumptions

Scenarios 2020 2021 2022

CAPEX
Imported Modules R$ 2.602/Wp R$ 2.394/Wp R$ 2.274/Wp
(R$/Wp)
The 240 MWp/180 MWac Power Plant
How energy price (R$/MWh) and CAPEX impact the PV Project IRR (Internal Rate of Return)?
The high volatility of PV Modules in the coming years brings uncertainty over the project CAPEX. We considered CAPEX variation by R$ 0.10/Wp

CAPEX Variation
Auction PPA Prices (R$/MWh) Free Market Prices (R$/MWh)
( all scenarios)

R$ 80/MWh R$ 85/MWh R$ 90/MWh 1st year R$ R$ 2.10/Wp R$ 2.20/Wp R$ 2.30/Wp

220/MWh
1st
R$ 95/MWh R$ 100/MWh R$ 105/MWh Condition 2nd year
R$ R$ 2.40/Wp R$ 2.50/Wp R$ 2.60/Wp
(if
operates) 180/MWh
R$ 110/MWh R$ 115/MWh R$ 120/MWh
R$ R$ 2.70/Wp R$ 2.80/Wp R$ 2.90/Wp
1st year
180/MWh
R$ 125/MWh R$ 130/MWh R$ 135/MWh 2nd
Condition 2nd year
R$ R$ 3.00/Wp
R$ 140/MWh R$ 145/MWh R$ 150/MWh (if
operates) 140/MWh
 How to read the results table?
Energy Prices are
illustrative, as it varies
according the each project
Macroeconomic Assumptions drivers and assumptions

WACC CAPEX VARIATION

7,56% R$2.10/Wp R$ 2.20/Wp R$ 2.30/Wp R$ 2.40/Wp R$ 2.50/Wp R$ 2.60/Wp R$ 2.70/Wp R$ 2.80/Wp R$ 2.90/Wp

Investment R$ 504 Millions R$ 528 Millions R$ 552 Millions R$ 576 Millions R$ 600 Millions R$ 624 Millions R$ 648 Millions R$ 672 Millions R$ 692 Millions

R$ 80/MWh -2,54% -2,76% -2,96% -3,15% -3,34% -3,51% -3,68% -3,84% -3,99%
The WACC represents the capital cost of the project,
R$ 85/MWh
comprising the equity cost and -0,18% -0,47%
the funding capital cost. -0,73% -0,98% -1,21% -1,43% -1,64% -1,84% -2,03%
The WACC is the reference rate to which the project has
R$ 90/MWh
a minimal expected outcome in2,06% 1,70%
line with the rate of risk 1,37% 1,06% 0,77% 0,50% 0,25% 0,01% -0,22%
adopted on own capital.
R$ 95/MWh 4,21% 3,76% 3,36% 2,98% 2,64% 2,31% 2,01% 1,73% 1,46%

R$ 100/MWh 6,27% 5,73% 5,25% 4,80% 4,40% 4,02% 3,67% 3,35% 3,04%

R$ 105/MWh 8,23% 7,60% 7,04% 6,53% 6,07% 5,64% 5,24% 4,87% 4,53%

R$ 110/MWh 10,11% 9,39% 8,75% 8,18% 7,65% 7,17% 6,72% 6,31% 5,93%

R$ 115/MWh 11,90% 11,10% 10,38% 9,74% 9,16% 8,62% 8,13% 7,68% 7,26%

R$ 120/MWh 13,61% 12,73% 11,94% 11,23% 10,59% 10,01% 9,48% 8,99% 8,53%

R$ 125/MWh 15,24% 14,28% 13,42% 12,66% 11,96% 11,34% 10,76%

Green cells are those conditions where10,23%
the IRR of the 9,74%
project exceeds the WACC of the project, presenting a
R$ 130/MWh 16,80% 15,76% 14,84% 14,02% 13,28% 12,60% 11,99%
positive gain (NPV > 0).11,42% 10,89%

R$ 135/MWh 18,28% 17,17% 16,20% 15,32% 14,53% 13,81% 13,16% 12,56% 12,00%

R$ 140/MWh 19,69% 18,53% 17,49% 16,57% 15,74% 14,98% 14,29% 13,65% 13,07%

R$ 145/MWh 21,04% 19,82% 18,74% 17,77% 16,89% 16,10% 15,37% 14,71% 14,09%

R$ 150/MWh 22,33% 21,06% IRR of the project

19,93% obtained under18,92% 18,01%
the conditions of energy sales 17,18% 16,42% 15,72% 15,08%
price and evaluated CAPEX condition.
Case 1 - Scenario 2020
2 years in Free Market + PPA 20 years
Impact of Free Market Prices. In this simulation was used R$ 220 for the first year and R$ 180 for the second.
WACC CAPEX VARIATION

7,56% R$2.10/Wp R$ 2.20/Wp R$ 2.30/Wp R$ 2.40/Wp R$ 2.50/Wp R$ 2.60/Wp R$ 2.70/Wp R$ 2.80/Wp R$ 2.90/Wp R$ 3.00/Wp

Investment R$ 504 Millions R$ 528 Millions R$ 552 Millions R$ 576 Millions R$ 600 Millions R$ 624 Millions R$ 648 Millions R$ 672 Millions R$ 692 Millions R$ 720 Millions

R$ 80/MWh -2,54% -2,76% -2,96% -3,15% -3,34% -3,51% -3,68% -3,84% -3,99% -4,14%

R$ 85/MWh -0,18% -0,47% -0,73% -0,98% -1,21% -1,43% -1,64% -1,84% -2,03% -2,21%

R$ 90/MWh 2,06% 1,70% 1,37% 1,06% 0,77% 0,50% 0,25% 0,01% -0,22% -0,44%

R$ 95/MWh 4,21% 3,76% 3,36% 2,98% 2,64% 2,31% 2,01% 1,73% 1,46% 1,21%

R$ 100/MWh 6,27% 5,73% 5,25% 4,80% 4,40% 4,02% 3,67% 3,35% 3,04% 2,75%

R$ 105/MWh 8,23% 7,60% 7,04% 6,53% 6,07% 5,64% 5,24% 4,87% 4,53% 4,20%

R$ 110/MWh 10,11% 9,39% 8,75% 8,18% 7,65% 7,17% 6,72% 6,31% 5,93% 5,57%

R$ 115/MWh 11,90% 11,10% 10,38% 9,74% 9,16% 8,62% 8,13% 7,68% 7,26% 6,87%

R$ 120/MWh 13,61% 12,73% 11,94% 11,23% 10,59% 10,01% 9,48% 8,99% 8,53% 8,10%

R$ 125/MWh 15,24% 14,28% 13,42% 12,66% 11,96% 11,34% 10,76% 10,23% 9,74% 9,28%

R$ 130/MWh 16,80% 15,76% 14,84% 14,02% 13,28% 12,60% 11,99% 11,42% 10,89% 10,41%

R$ 135/MWh 18,28% 17,17% 16,20% 15,32% 14,53% 13,81% 13,16% 12,56% 12,00% 11,49%

R$ 140/MWh 19,69% 18,53% 17,49% 16,57% 15,74% 14,98% 14,29% 13,65% 13,07% 12,52%

R$ 145/MWh 21,04% 19,82% 18,74% 17,77% 16,89% 16,10% 15,37% 14,71% 14,09% 13,52%

R$ 150/MWh 22,33% 21,06% 19,93% 18,92% 18,01% 17,18% 16,42% 15,72% 15,08% 14,48%
Case 2 - Scenario 2020
2 years in Free Market + PPA 20 years
Impact of Free Market Prices. In this simulation was used R$ 180 for the first year and R$ 140 for the second.
WACC CAPEX VARIATION

7,56% R$2.10/Wp R$ 2.20/Wp R$ 2.30/Wp R$ 2.40/Wp R$ 2.50/Wp R$ 2.60/Wp R$ 2.70/Wp R$ 2.80/Wp R$ 2.90/Wp R$ 3.00/Wp

Investment R$ 504 Millions R$ 528 Millions R$ 552 Millions R$ 576 Millions R$ 600 Millions R$ 624 Millions R$ 648 Millions R$ 672 Millions R$ 692 Millions R$ 720 Millions

R$ 80/MWh -3,34% -3,52% -3,69% -3,85% -4,00% -4,15% -4,29% -4,43% -4,56% -4,69%

R$ 85/MWh -1,19% -1,42% -1,63% -1,83% -2,02% -2,21% -2,38% -2,55% -2,71% -2,87%

R$ 90/MWh 0,83% 0,55% 0,29% 0,05% -0,19% -0,41% -0,62% -0,82% -1,01% -1,19%

R$ 95/MWh 2,74% 2,41% 2,10% 1,80% 1,53% 1,27% 1,03% 0,79% 0,57% 0,36%

R$ 100/MWh 4,56% 4,17% 3,80% 3,46% 3,14% 2,85% 2,56% 2,30% 2,05% 1,81%

R$ 105/MWh 6,29% 5,84% 5,42% 5,03% 4,67% 4,33% 4,01% 3,72% 3,44% 3,17%

R$ 110/MWh 7,95% 7,43% 6,96% 6,52% 6,12% 5,74% 5,39% 5,06% 4,75% 4,45%

R$ 115/MWh 9,53% 8,95% 8,42% 7,94% 7,49% 7,08% 6,69% 6,33% 5,99% 5,67%

R$ 120/MWh 11,05% 10,41% 9,83% 9,30% 8,81% 8,36% 7,93% 7,54% 7,17% 6,83%

R$ 125/MWh 12,50% 11,80% 11,17% 10,60% 10,07% 9,58% 9,12% 8,70% 8,30% 7,93%

R$ 130/MWh 13,89% 13,14% 12,46% 11,84% 11,27% 10,75% 10,26% 9,81% 9,38% 8,99%

R$ 135/MWh 15,23% 14,43% 13,70% 13,04% 12,43% 11,87% 11,35% 10,87% 10,42% 10,00%

R$ 140/MWh 16,52% 15,67% 14,89% 14,19% 13,55% 12,95% 12,41% 11,90% 11,42% 10,98%

R$ 145/MWh 17,76% 16,86% 16,04% 15,30% 14,62% 14,00% 13,42% 12,89% 12,39% 11,92%

R$ 150/MWh 18,95% 18,01% 17,15% 16,37% 15,66% 15,01% 14,40% 13,84% 13,32% 12,83%
Case 3 - Scenario 2021
1 year in Free Market + PPA 20 years
Impact of Free Market Prices. In this simulation was used R$ 220 for one year operating in Free Market.
WACC CAPEX VARIATION

7,41% R$2.10/Wp R$ 2.20/Wp R$ 2.30/Wp R$ 2.40/Wp R$ 2.50/Wp R$ 2.60/Wp R$ 2.70/Wp R$ 2.80/Wp R$ 2.90/Wp R$ 3.00/Wp

Investment R$ 504 Millions R$ 528 Millions R$ 552 Millions R$ 576 Millions R$ 600 Millions R$ 624 Millions R$ 648 Millions R$ 672 Millions R$ 692 Millions R$ 720 Millions

R$ 80/MWh -4,28% -4,47% -4,65% -4,82% -4,98% -5,14% -5,29% -5,43% -5,57% -5,71%

R$ 85/MWh -1,73% -1,98% -2,22% -2,44% -2,65% -2,85% -3,05% -3,23% -3,40% -3,57%

R$ 90/MWh 0,68% 0,36% 0,06% -0,22% -0,49% -0,74% -0,97% -1,20% -1,41% -1,62%

R$ 95/MWh 2,98% 2,57% 2,20% 1,86% 1,54% 1,24% 0,96% 0,69% 0,44% 0,20%

R$ 100/MWh 5,18% 4,69% 4,25% 3,84% 3,46% 3,11% 2,77% 2,46% 2,17% 1,89%

R$ 105/MWh 7,29% 6,72% 6,20% 5,72% 5,28% 4,87% 4,49% 4,14% 3,80% 3,49%

R$ 110/MWh 9,33% 8,67% 8,07% 7,52% 7,02% 6,56% 6,13% 5,73% 5,35% 5,00%

R$ 115/MWh 11,30% 10,55% 9,87% 9,25% 8,68% 8,17% 7,69% 7,24% 6,83% 6,44%

R$ 120/MWh 13,20% 12,35% 11,60% 10,91% 10,28% 9,71% 9,19% 8,70% 8,24% 7,82%

R$ 125/MWh 15,03% 14,10% 13,26% 12,51% 11,83% 11,20% 10,62% 10,09% 9,60% 9,14%

R$ 130/MWh 16,80% 15,79% 14,88% 14,06% 13,31% 12,64% 12,01% 11,44% 10,90% 10,41%

R$ 135/MWh 18,52% 17,42% 16,44% 15,55% 14,75% 14,02% 13,35% 12,74% 12,17% 11,63%

R$ 140/MWh 20,17% 18,99% 17,94% 17,00% 16,15% 15,37% 14,65% 13,99% 13,39% 12,82%

R$ 145/MWh 21,77% 20,52% 19,41% 18,41% 17,50% 16,67% 15,91% 15,22% 14,57% 13,97%

R$ 150/MWh 23,32% 22,00% 20,83% 19,77% 18,81% 17,94% 17,14% 16,40% 15,72% 15,09%
Case 4 - Scenario 2021
1 year in Free Market + PPA 20 years
Impact of Free Market Prices. In this simulation was used R$ 180 for one year operating in Free Market.
WACC CAPEX VARIATION

7,41% R$2.10/Wp R$ 2.20/Wp R$ 2.30/Wp R$ 2.40/Wp R$ 2.50/Wp R$ 2.60/Wp R$ 2.70/Wp R$ 2.80/Wp R$ 2.90/Wp R$ 3.00/Wp

Investment R$ 504 Millions R$ 528 Millions R$ 552 Millions R$ 576 Millions R$ 600 Millions R$ 624 Millions R$ 648 Millions R$ 672 Millions R$ 692 Millions R$ 720 Millions

R$ 80/MWh -4,65% -4,82% -4,99% -5,14% -5,29% -5,44% -5,58% -5,71% -5,84% -5,97%

R$ 85/MWh -2,21% -2,44% -2,65% -2,85% -3,04% -3,23% -3,40% -3,57% -3,74% -3,89%

R$ 90/MWh 0,08% -0,21% -0,47% -0,72% -0,96% -1,19% -1,40% -1,61% -1,80% -1,99%

R$ 95/MWh 2,25% 1,90% 1,57% 1,27% 0,98% 0,71% 0,46% 0,22% -0,01% -0,23%

R$ 100/MWh 4,31% 3,90% 3,51% 3,15% 2,81% 2,50% 2,20% 1,92% 1,66% 1,41%

R$ 105/MWh 6,29% 5,80% 5,35% 4,94% 4,55% 4,19% 3,85% 3,53% 3,23% 2,95%

R$ 110/MWh 8,19% 7,63% 7,12% 6,64% 6,20% 5,80% 5,42% 5,06% 4,72% 4,40%

R$ 115/MWh 10,03% 9,39% 8,81% 8,28% 7,79% 7,33% 6,91% 6,51% 6,14% 5,79%

R$ 120/MWh 11,80% 11,08% 10,44% 9,85% 9,31% 8,80% 8,34% 7,90% 7,50% 7,12%

R$ 125/MWh 13,51% 12,72% 12,01% 11,36% 10,77% 10,22% 9,71% 9,24% 8,80% 8,39%

R$ 130/MWh 15,16% 14,30% 13,53% 12,83% 12,18% 11,59% 11,04% 10,53% 10,06% 9,61%

R$ 135/MWh 16,76% 15,84% 15,00% 14,24% 13,55% 12,91% 12,32% 11,78% 11,27% 10,79%

R$ 140/MWh 18,32% 17,33% 16,43% 15,62% 14,88% 14,19% 13,57% 12,98% 12,44% 11,93%

R$ 145/MWh 19,83% 18,77% 17,82% 16,95% 16,16% 15,44% 14,77% 14,15% 13,58% 13,04%

R$ 150/MWh 21,29% 20,17% 19,16% 18,25% 17,41% 16,65% 15,94% 15,29% 14,68% 14,12%
Case 5 - Scenario 2022
Only Regulated Market (PPA 20 years)
WACC CAPEX VARIATION

7,41% R$2.10/Wp R$ 2.20/Wp R$ 2.30/Wp R$ 2.40/Wp R$ 2.50/Wp R$ 2.60/Wp R$ 2.70/Wp R$ 2.80/Wp R$ 2.90/Wp R$ 3.00/Wp

Investment R$ 504 Millions R$ 528 Millions R$ 552 Millions R$ 576 Millions R$ 600 Millions R$ 624 Millions R$ 648 Millions R$ 672 Millions R$ 692 Millions R$ 720 Millions

R$ 80/MWh -6,20% -6,31% -6,42% -6,52% -6,62% -6,72% -6,82% -6,91% -7,00% -7,09%

R$ 85/MWh -4,36% -4,49% -4,62% -4,74% -4,86% -4,98% -5,09% -5,21% -5,31% -5,42%

R$ 90/MWh -2,63% -2,79% -2,94% -3,08% -3,22% -3,36% -3,49% -3,62% -3,75% -3,87%

R$ 95/MWh -1,00% -1,18% -1,35% -1,52% -1,68% -1,84% -1,99% -2,14% -2,28% -2,42%

R$ 100/MWh 0,56% 0,36% 0,16% -0,03% -0,22% -0,40% -0,57% -0,73% -0,89% -1,05%

R$ 105/MWh 2,07% 1,83% 1,61% 1,39% 1,18% 0,98% 0,79% 0,61% 0,43% 0,25%

R$ 110/MWh 3,53% 3,27% 3,01% 2,77% 2,53% 2,31% 2,10% 1,89% 1,69% 1,50%

R$ 115/MWh 4,96% 4,66% 4,37% 4,10% 3,84% 3,60% 3,36% 3,13% 2,91% 2,70%

R$ 120/MWh 6,36% 6,02% 5,71% 5,41% 5,12% 4,85% 4,59% 4,34% 4,10% 3,87%

R$ 125/MWh 7,74% 7,36% 7,01% 6,68% 6,37% 6,07% 5,78% 5,51% 5,25% 5,00%

R$ 130/MWh 9,10% 8,69% 8,30% 7,94% 7,59% 7,26% 6,95% 6,66% 6,37% 6,10%

R$ 135/MWh 10,45% 10,00% 9,57% 9,17% 8,80% 8,44% 8,10% 7,78% 7,48% 7,18%

R$ 140/MWh 11,80% 11,30% 10,83% 10,40% 9,99% 9,60% 9,24% 8,89% 8,56% 8,25%

R$ 145/MWh 13,14% 12,59% 12,09% 11,61% 11,17% 10,75% 10,36% 9,98% 9,63% 9,29%

R$ 150/MWh 14,48% 13,88% 13,33% 12,82% 12,34% 11,89% 11,46% 11,06% 10,68% 10,32%
Using the Tables
Bid Price for achieving Expected IRR

To analyze the tables we must first set the Expected IRR from the investments. The table below presents a condition of inflation plus
6% and the IRR for each Scenario simulated.

Scenarios – Year of Construction

2020 2021 2022
Expected IRR
10.00% 9.75% 9.75%
(IPCA + 6.0%)
How to use the results table?
Scenarios
2020 (I) 2021 (II) 2022 (III)
Expected IRR 10.00% 9.75% 9.75%
(IPCA + 6.0%)

Free Market
2020(I) Free Market
2021(II) 2022(III)
Price Price
1st year/2nd year
R$ 220/180 R$ 100.00/MWh R$ 220 R$ 100.00 /MWh
R$ 100.00 /MWh
R$ 180/140 R$ 100.00 /MWh R$ 180 R$ 100.00 /MWh

CAPEX: R$ 2,306/Wp CAPEX: R$ 2.394/Wp CAPEX: R$ 2.274/Wp

Interest: 6,27% the bid value that returns the given
This price represents Interest: 6.02% Interest: 6.02%
Free Market:
IRR for each 2 years
scenario: considering the price of energy in Free Market: 1 year Free Market: None
the Free Market, the estimated CAPEX for the year and
Equity: R$ 221.4 Mi Equity: R$ 229.8 Mi Equity: R$ 218.3 Mi
interest rate.
Funding: R$ 332.0 Mi Funding: R$ 344.7 Mi Funding: R$ 327.5 Mi
Total: R$ 553.4 Mi Total: R$ 574.6 Mi Total: R$ 545.8 Mi
Using the Tables
Bid Price for achieving Expected IRR
Scenarios
2020 (I) 2021 (II) 2022 (III)
Expected IRR 10.00% 9.75% 9.75%
(IPCA + 6.0%)

Free Market
2020(I) Free Market
2021(II) 2022(III)
Price Price
1st year/2nd year
R$ 220/180 R$ 120.00/MWh R$ 220 R$ 116.38/MWh
R$ 135.27/MWh
R$ 180/140 R$ 126.83/MWh R$ 180 R$ 119.57/MWh

CAPEX: R$ 2.602/Wp CAPEX: R$ 2.394/Wp CAPEX: R$ 2.274/Wp

Interest: 6.27% Interest: 6.02% Interest: 6.02%
Free Market: 2 years Free Market: 1 year Free Market: None
Equity: R$ 249.8 Mi Equity: R$ 229.8 Mi Equity: R$ 218.3 Mi
Funding: R$ 374.7 Funding: R$ 344.7 Mi Funding: R$ 327.5 Mi
Total: R$ 624.05 Total: R$ 574.6 Mi Total: R$ 545.8 Mi
Conclusion

Operating in the Free Market can help improve the Internal Rate of Return, but it requires anticipating investments, what generates financial costs for
Power Plant and higher CAPEX expenditures, since PV equipment are expected to maintain reducing costs. For this reason, a good forecast of Modules,
Inverter and Tracker costs, future Free Market prices and macro economical variables like Inflation and Interest Rates are essential for optimizing the
Return of the Investment.

Some points to be noted about the strategies:

• Anticipating the power plant start-up could be a good strategy to reduce the energy sales price at the auction, but restriction in module supply and
available EPC companies should be a warning point to follow schedule.
• Considering the participation of development banks to guarantee a competitive bid is also a risk due to great uncertainty of approval
and availability of the resource.
• A strong reduction in Capital Expenditures is essential for a competitive Bid. For this reason, the CAPEX estimated for 2020, 2021 and 2022 need to
be reached for the cases presented.
• Low additional revenues due to low Free Market prices can not compensate anticipating Financial Costs. Then a good predictive model is necessary for
a better return.
• After the end of PPA, the plant still generates energy. This way, the owner can sell the asset or sell the energy and still have revenues.
 !

GREENER INSIGHTS
Our vision for cost-effective projects
Scenarios
!
Although they reflect the current conditions, the considered scenarios for implementation of the power
plants have high degree of uncertainty, especially in the period from 2020, since the CAPEX, inflation and
interest rates are forecasts.

The new elected president’s intentions regarding new auctions for PV are uncertain. It is necessary to
wait the beginning of the new government to understand what we can expect for 2019 and the following
years.

The exchange rate is a key driver for PV plants’ CAPEX. Since the PPA is contracted in BRL and the main
equipment in USD, a good model to predict exchange scenarios and adoption of mechanism to reduce
impacts from changes in the USD vs BRL are necessary for risk reduction.
Modules
!
Module prices are highly sensitive to international demand. China, USA, India and Japan impact
equipment prices when pushing demand up or down.

An important factor to be considered with respect to the modules supply is connected to the delivery
availability, both in the local and international market. Price may not be the main driver in a short term
scenario.

New technologies – perc and bifacial – can bring an important progress in plant productivity and improve
Return of Investment. Study and analyze these technologies are essential for competitive projects.
Funding
!
Although the development banks present competitive financial rates, an investor should consider the
requirements for application and the uncertainty about the resources availability, which can limit the
volume of benefited projects.

Considering that probably we will not have great upsides on Selic index, the conditions of financing and
capital structure using infrastructure debentures insurance could be favorable.

Developing scalable projects, able to operate both in Regulated and in Free Market, could be a key
strategy to optimize CAPEX and OPEX, increasing return of investment and competitiveness. On the other
hand, Free Market projects still have lower bankability due to short-term contracts and higher default
risks.
Pricing
!

Various scenarios were presented to help understanding a PPA pricing, however it is emphasized we
don’t consider the presented values as a "milestone" for the 240 MWp/180 MWac projects.

Anticipating the generation through Free Market Contracts could be a good opportunity to increase the
project competitiveness. On the other hand, Free Market’s volatility represents a risks since a low price
contract can reduce the Return of Investment.
Strategic Study Utility Scale Brazilian PV Market 2019

All rights reserved.

+55 11 3586-9466

contato@greener.com.br

www.greener.com.br