LONDON, UK: VH Global Sustainable Energy Opportunities plc, a London-listed investment company advised by Victory Hill Capital Advisors LLP, announced the acquisition of the Mascarenhas Hydro Electric Facility in the state of Espírito Santo, Brazil.
The acquisition is for a total consideration of BRL 1,225mn comprised of BRL 800mn on closing subject to adjustments.
The remainder is payable subject to the conditions established under the process of renewal of the Hydro Facility concession in H1 2027. The transaction closing is subject to customary regulatory approvals. This run-of-river asset’s nameplate capacity is 198MW and has been operational since 1974.
The Hydro Electric Generation Facility is being acquired from EDP Energias do Brasil S.A., a listed company on the Sao Paulo Stock Exchange, one of Brazil’s largest electric utility companies and a subsidiary of leading European utility Electricidade de Portugal S.A. (EDP).
Since it was first commissioned, the Hydro Facility has been maintained and managed to a high standard. As a result, it offers a strong and sustainable cashflow potential for GSEO with an estimated remaining useful life of 45 years. Over 60 per cent of the revenues are secured under long-term Power Purchase Agreements (PPA) with local utilities.
The energy regulator in Brazil ranks over 140 hydro plants across the country, based on a number of factors to assess their quality and operation. The Mascarenhas facility has been consistently ranked as a top 10 hydro plant in the country.
The acquisition of the Hydro Facility adheres to the Company’s renewable power enablement strategy for Brazil. Brazil is an OECD Key Partner Country with the largest power market in Latin America and a population of over 213 million people. Brazil is also one of the largest hydro power markets in the world.
The Company will appoint Paraty Energia Ltda.(“Paraty”) as its local operating partner in respect of Mascarenhas. Paraty will hold a minority equity position and will receive performance incentives for their management of the Hydro Facility. Paraty is an active participant in the Brazilian energy sector specialising in energy trading, project advisory and operations. The company was established in 2020 and has a strong operating track record.
An independent assessment of the Hydro Facility has concluded that it adheres to the Company’s six relevant UN Sustainable Development Goals – goals 3, 7, 8, 9 13 and 17 – and is doing no significant harm in the context of the remaining eleven goals. The expected annual returns exceed the Company’s target annual dividend and total return.
Eduardo Monteiro, Co-Chief Investment Officer of Victory Hill, investment adviser to the Company, said: “The acquisition of Mascarenhas marks our first investment in hydro power and provides us with a highly reliable source of power generation backed by long term secure PPAs.
The preconditions to enabling more penetration of wind and solar power capacity in the Brazilian energy mix are well established and strongly underpinned by government policies and the significant contribution of hydro power.
Hydro power generation is one of the oldest and most proven power generation sources, complementing more intermittent renewable sources such as wind and solar and ultimately facilitates the presence of such energy sources in the energy mix. We look forward to working with the Company’s new operating partners to maximise the contribution of this asset to the portfolio.”
Pedro Pileggi, Co-Founder and CEO of Paraty, said: “We are delighted to be working with the Victory Hill Team on this project. We have attracted some of the market’s best hydro operators and will be retaining the experience and expertise of the Mascarenhas facility’s existing ground team of 22 people. We are proud to be appointed for the operation of one of our country’s most established hydro power facilities and serving the communities that surround it”.