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Written by Paula Padilha Cabral Falbo and Alberto Weyland Vieira
With decades of experience in sustainable energy production, and newer production processes primed for expansion, Brazil is at the forefront of the global energy transition. Making it an attractive proposition for investment in this important field.
Whether it’s Mergers & Acquisitions (M&A) or new project development, Brazil’s energy transition holds vast opportunities – for international investors, the law firms that represent them, and companies in the national and international energy sector.
Brazil’s energy matrix is already very green and well-diversified and has been for decades. Hydro provides over 60% of the country’s power, with coal and non-renewables supplying less than 2%. The sector is well developed and at the same time, alternative energy sources such as green hydrogen hold the potential for significant future growth.
However, there are challenges to Brazil’s green energy transition:
o A continuing need for oil in a country where the main means of transport is road.
o High levels of regulation in established areas of sustainable energy production.
o Brazil can be a complex country to do business in.
The good news for those with an interest in this market is that these challenges also present opportunities.
Source: https://www.epe.gov.br/pt/abcdenergia/matriz-energetica-e-eletrica
With a large landmass, numerous rivers, and extensive coastline, Brazil is a unique country that offers the perfect conditions for sustainable energy production.
Overseas investors can be reassured that recent reforms have simplified the country’s notoriously complex tax laws. In addition, Brazil’s environmental laws and corporate laws have also been modernised, reducing the bureaucracy involved in corporate registration and obtaining licenses.
Brazil is more friendly towards corporate investors than many South American countries. The government exerts less control over foreign capital, making it simpler to move funds in and out of the country. The political environment is stable and the energy sector has not been affected by the recent change of government.
“Brazil is a well-placed jurisdiction for investment in the sustainable energy sector. Our unique geography gives us an advantage, alongside our modernised environmental, corporate and tax laws.”
Paula Padilha Cabral Falbo, Partner Energy & Natural Resources: Power and Infrastructure, Vieira Rezende
Green hydrogen is produced by splitting water into hydrogen and oxygen using clean energy. Brazil holds vast potential for the production of green hydrogen for:
• Internal use, for biofuel to replace oil in the transportation sector for example.
• Export to a large international market with a high demand for clean energy.
Around 70% of the cost of green hydrogen is energy use. Due to the current energy matrix in Brazil, the cost-effective and clean energy required to produce green hydrogen is readily available in the form of solar and wind energy. This facilitates the Green Certification required to qualify as green hydrogen, rather than the grey hydrogen produced using energy from unsustainable sources. Discussions are underway between Brazil and the European Union (EU) to finalise details for the Green Certification required for export to Europe. What’s more, multiple green hydrogen pilot projects are already in place.
Against this background, Vieira Rezende continues to research and investigate the potential that lies in green hydrogen and we believe it presents a prime opportunity for investment in new projects. Either as a long-term investment or as a short-term opportunity, securing the necessary greenfield sites, land area control, licenses, and project designs for others to then implement.
Experience of the local environment, regulations and complexities is vital, at all stages and on both sides of green hydrogen projects, for those selling and those buying. Vieira Rezende’s multi-disciplinary team has the expertise and joined up approach needed to manage these projects from the very beginning. We cover all aspects, from administrative law and regulations to environmental and corporate law, managing everything in one place.
With a large landmass and ample solar energy across most of the country, Brazil is well placed for even further development in wind and solar power. This expansion is positioned to support growth in the production of green hydrogen by providing the clean energy required – a factor that has contributed to the increase in plans for new development projects, with the physical space for them to grow.
Involvement in both new and existing wind and solar projects is a viable option. However, due to the well-established nature of this market, it is highly regulated. With solar there is a continuing debate about whether the focus should be on centralised or more local generation, and the sector still needs to come to an agreement on this. Due to these complexities, working with a law firm with experience in this area is vital.
A potential area for the development of wind power in Brazil is offshore wind plants. And Vieira Rezende has been commissioned by the World Bank to study the viability of these plants in Brazil. One driver for this is that offshore wind plants have the potential to support the production of green hydrogen, with the sustainable energy and water required all available in one place. Our study looks into the question of whether this approach is viable, in terms of the space and construction needed.
Due to the well-established nature of both wind and solar energy production in Brazil, the primary opportunities lie within M&A f0r existing projects. In 2023, there were more than 190 solar and wind transactions, involving more than 50 billion reais and 50 GW of energy.
The Vieira Rezende team contains specialists in investment funds, private equity, tax, real estate and other areas that deal with M&A negotiations. This enables us to assist through all phases and peculiarities of the M&A process. We have advised in a variety of sustainable energy M&A cases representing banks, asset managers, private equity funds, venture capital, and their domestic and foreign investors.
Brazil has proven experience and a well-established sustainable energy sector. Opportunities still lie in areas with a history of success, such as wind and solar energy, as well as in new and emerging areas of sustainable energy production, such as green hydrogen.
The outlook is positive for investment in Brazil’s energy transition, with the best returns to be found in long term investments and partnerships. However, local support is advised in a country where doing business can be complicated – and there are restrictions on the operations of international law firms. Vieira Rezende has extensive experience of supporting clients across all aspects and areas of the energy sector.
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The Vieira Rezende team supported Invenergy, an American company leading in the operation and development of renewable generation plants, in the purchase of four wind farms. These farms collectively generate approximately 600 MW of installed capacity.
We supported NEC, whose main activity is the generation of electricity, in the sale of four companies to Norwegian company Scatec. The companies are Special Purpose Entities with the rights to construct and operate solar energy farms with an installed capacity of 105 MW.
We conducted analysis and prepared a report ‘Scenarios for the Development of Offshore Wind Power in Brazil’ to support the Brazilian government in defining public policies for energy transition. The work was led by the World Bank and the International Finance Corporation.
We assisted Dutch investors in funding a solar energy plant in the Amazon rainforest. This initiative aimed to support local communities in generating renewable electricity and reducing reliance on fossil fuel-based thermal power plants.
We advised Italian multinational renewable energy corporation Enel Green Power on implementing a €454 million wind energy park in the state of Bahia, northeastern Brazil. The Aroeira wind farm, with 81 turbines and a 348 MW capacity, will generate over 1,800 GWh annually, avoiding 980,000 tons of CO2 emissions and replacing 345 million cubic meters of gas.
Vieira Rezende is distinguished by our professional excellence. We offer our clients experience, expertise and reliability, delivering all the support you need.
Our team of specialists is well qualified and offers a breadth and depth of experience in the energy sector and related projects and deals in Brazil.
Our multi-disciplinary team contains expertise across over 20 different practice areas. This includes Mergers & Acquisitions, corporate law, tax law, real estate, regulatory issues, and environmental matters in the energy sector. Our finance department works with Brazilian and foreign banks to structure project financing for new projects.
“It’s not easy to navigate the complexities of doing business in Brazil. Our team has extensive experience of helping foreign investors in Brazil to deal with the challenges.”
Alberto Weyland Vieira, Partner Corporate / M&A, Vieira Rezende
