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After an agreement with Brookfield, Newen plans to invest R$1.5 billion in a new Solar Cluster in Minas Gerais

São Paulo, January 16, 2020 - After signing an agreement with Brookfield Energia Renovável for the sale of nine solar plants in Ceará, Newen, the second-largest winner of new energy auctions for the solar source, is prioritizing the construction of a new cluster of enterprises in Minas Gerais. In all, the company plans to invest R$1.5 billion in projects that will have 100% of the offer destined in contracts in the free market, either in bilateral agreements or in energy self-production models.

Founded in 2014, Newen, controlled by the Brazilian construction company Steelcons, specializes in the development of solar projects. In the last five years, the company has negotiated the offer of 16 solar plants in the states of Ceará and Bahia in regulated auctions, projects that total 472 MW of installed capacity. This performance in the auctions organized by the federal government is only surpassed by the Italian company Enel Green Power.

With 4,000 MW of projects in the Northeast and Southeast in different stages of development, Newen has plans to commercialize this supply in regulated auctions and in the free market. In the case of the Northeastern plants, due to the risk of price differences between the submarkets, the priority is to sell to distributors, although negotiation with large consumers is not ruled out. "In the Southeast, the energy will be destined 100% for the free market and self-production," said the president of Newen, Rodolfo Toni.

This is the case with the projects in Minas Gerais. The company has plans to build a 600 MW capacity cluster of solar projects in the municipality of Janaúba. Although Toni did not disclose the names of the projects, he revealed that the company has already signed its first contract for the purchase and sale of energy in the free market for projects totaling 200 MW, and has already signed a memorandum of understanding for the implementation of another 100 MW in the modality of energy self-production.

The remaining 300 MW will be built in a business model called merchant, i.e. when the generator accepts the risk of building a plant without having energy sales contracts. In this format, the energy commercialization arm of the company, Newen Soluções em Energia, will seek buyers in the market for the supply of the project.

"The contracts signed 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 to make the investments in the merchant plants viable," said Toni. In the company's strategy, 50% of the R$1.5 billion should come from development banks and 30% from the issue of infrastructure debentures. "The other 20% will be invested with the company's own capital," he added. The 600 MW of the new cluster is expected to start commercial operation in mid-2022.

For Toni, the financial modeling designed for the new cluster in Minas Gerais is in line with the current context of the Brazilian electricity sector. According to the executive, banks are already willing to finance projects that do not have long-term sales contracts, unlike what used to happen years ago. "The institutions are already working with a concept of PLD Support, with values in the range of R$90/MWh to R$110/MWh," he said. The difference settlement price (PLD) is used as a benchmark for the contracts in the free market.

The specialization in solar energy projects is seen by Newen as a competitive differential with the entry of the hourly PLD, expected to happen in January 2021. The tendency is that the spot price of energy will be more expensive during the day when there is a peak in the consumption of electric energy, precisely the period of greater production of solar energy. "At night, when there is no solar generation, we buy energy from other sources at a lower cost," argued the executive, thus emphasizing the importance of the performance of the company's trading office, which was founded last year.

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