Neonergia courts GIC to fuel Brazil’s power grid

SINGAPORE: Neoenergia plans to propose a sale of its transmission assets to Singapore’s sovereign wealth fund GIC. It also reflects the growing global interest in Brazil’s energy infrastructure.

The Brazilian electric utility, which is a subsidiary of Spain’s Iberdrola, is set to offer GIC a 50% stake in a four-project transmission portfolio by 2026. CEO Eduardo Capelastegui discussed this potential deal during a recent quarterly briefing. He emphasised a careful plan for managing capital and lowering debt.

In a previous deal in 2023, GIC acquired 50% of eight operational transmission assets that span 1,865 km and generate BRL 1.2 billion (S$277.63 million).

According to the GIC 2023/2024 Report, over the 20 years up to 31 March 2024, its portfolio posted annualised real returns of 3.9%. Latin America accounts for 4% of GIC’s global portfolio.

The current project is expected to be finished by end-2025. It expands Neoenergia’s platform, which manages 6,279 km of transmission lines.

Neoenergia’s asset rotation strategy is intentional. By selling selected infrastructure assets, the company frees up capital for reinvestment and simplifies its balance sheet. The sales from 2023 and 2025 have already brought in over BRL 1.3 billion (S$300.57 million), funding the company’s BRL 7 billion (S$1.62 billion) annual investment in distribution networks and renewable energy projects.

Capelastegui highlighted the company’s flexibility, mentioning that the sale is not necessary. “We will carefully assess any offer to ensure it serves our shareholders’ interests,” he stated. This careful approach was clear when the company decided to skip the October 2025 transmission auction, explaining that the returns were below their target of double-digit real returns.

The partnership with GIC provides strategic benefits for both sides. For Neoenergia, it offers financial strength and shared risks in Brazil’s capital-heavy transmission sector. For GIC, it represents a stable, long-term investment in key emerging market infrastructure with substantial growth potential.

The promise of the venture is highlighted by recent project completions. In 2024, assets like Itabapoana, Estreito, and Paraíso generated an additional BRL 300 million (S$69.3 million) in revenue annually, and it is anticipated that assets currently under construction will generate an additional BRL 700 million (S$161.9 million).

The Neoenergia-GIC partnership is prepared to play a significant role in forming Brazil’s power grid infrastructure as the country accelerates its energy transition.

GIC’s potential purchase of transmission assets and its latest investment in German property tech firm Techem align with its strategic focus on infrastructure and sustainable energy solutions.