Rousseff Solar Push Thwarted by BNDES Loan Ban: Corporate Brazil

Brazil’s bid to spur solar-energy projects is failing as a ban on state subsidies for foreign-made panel parts hinders sales by the world’s biggest producers.

Buyers of equipment made by Yingli Green Energy Holding Co. (YGE), Suntech Power Holdings Co. (STP) and Trina Solar Ltd. (TSL) -- three of the world’s four largest panel makers -- aren’t eligible for loans at below-market rates from state bank BNDES. That leaves Campinas, Brazil-based Tecnometal Equipamentos Ltda. as the only maker of subsidized panels that turn sunlight into electricity.

President Dilma Rousseff last month said utilities will allow homeowners and businesses to install solar panels and trade electricity in the nation’s power grid next year as part of Brazil’s “bet on an economic-growth model based on clean, renewable energy.” Her efforts to promote the technology are being undermined by the financing ban because domestic-made parts are too expensive to make projects viable, said Helcio Garcia Camarinha, chief executive officer of Braxenergy, a developer of solar projects.

“You can get a government loan but then again your module is 30 percent more costly so what’s the point?” Niels Kleer, chief of operations of the joint venture between German solar developer Gehrlicher Solar AG and Ecoluz Participacoes SA, said by telephone from Salvador, Brazil.

Chinese panel makers who are shut out of the market in Brazil, Latin America’s largest economy, are shifting sales to Chile, where state-owned copper miner Codelco is using solar panels to cut costs and Anglo American Plc (AAL) is planning projects, Salvador Escobedo, founding partner at Panama City-based solar developer Solam Group, said in a telephone interview.

‘Massive Potential’

Developers have announced plans this year to install more than 1,000 megawatts of photovoltaic panels in Chile, compared with 67.5 megawatts in Brazil, Bloomberg New Energy Finance data show. Brazil has two large solar projects online with 1.4 megawatts of installed capacity, compared with 1,919 megawatts in Germany, where sunlight is 40 percent less intense.

“Brazil has massive potential -- credit is the industry’s main obstacle,” Camarinha said in a telephone interview from Sao Paulo. “Conventional lines of credit are very expensive.”

The BNDES offers 15-year loans with interest rates as low as 2.5 percent, less than a third of Brazil’s Selic benchmark interest rate, for solar projects as part of the government’s climate fund, said Marcio Macedo, head of the environment department at the Brasilia-based bank.

To qualify for the loan, at least 60 percent of a solar project’s parts must be locally made. So far, the BNDES, or Banco Nacional de Desenvolvimento Economico e Social, hasn’t received any requests for the financing, he said.

Solar Losses

First Solar Inc., the biggest U.S. solar company, had been the only one forecast to report a profit in the second quarter among the 17 companies in the BI Global Large Solar Index, according to estimates collected by Bloomberg as of July 31. The rest, led by Suntech of China, were expected to have losses.

First Solar reported second-quarter profit rose 81 percent to $111 million on Aug. 2. Suntech is scheduled to report earnings later in August.

All 17 members of the Bi Solar index have tumbled in the past 12 months as the index slid 66 percent. Suntech is the index’s second-largest decliner in the period, plunging 80 percent, First Solar dropped 78 percent and Yingli fell 64 percent.

“Panels are a large part of the overall system costs,” Macedo said. “It’s going to be very difficult to reach the 60 percent threshold if you import the panel.”

Stadium Panels

Joint venture Gehrlicher Ecoluz Solar do Brasil won a contract to install solar panels at the Pituacu sports stadium in the northeastern city of Salvador using equipment from Baoding, China-based Yingli and the U.S.’s United Solar Ovonic Corp. The project was financed by utility Cia. de Eletricidade do Estado da Bahia and the state government.

Homeowners who want to buy Chinese panels can tap a 60- month loan from state-run bank Caixa Economica Federal with rates as low as 18 percent, Jean Benevides, national manager of environment for the Brasilia-based lender, said in a telephone interview. No one has bought solar equipment using the line, which offers the lowest rates for panel purchases in Brazil.

Rates on bank loans for rooftop panels are about 6 percent in Germany and 8.5 percent in Italy, said Jenny Chase, an analyst at Bloomberg New Energy Finance’s London office.

Brazil’s Ministry for Mines and Energy didn’t respond to an e-mail or telephone call seeking comment from Bloomberg News.

Wind Energy

BNDES’s local-content rules played a crucial role in creating a domestic industry for wind turbines in the past three years and helped make the renewable energy cheaper, said Nelson Fonseca Leite, president of the Brasilia-based Brazilian Association of Electric Energy Distributors.

In addition to the local-content rules, the government also needs to auction contracts to supply energy from solar projects, similar to the ones awarded in 2009 for wind energy, in order to encourage Chinese companies to build factories in Brazil, he said.

“For manufacturers to come here there must be a guaranteed market for solar, which there isn’t at the moment,” Leite said.

Import tariffs, shipping costs and other duties make some solar equipment as much as 85 percent more expensive in Brazil than the rest of the world, said Jose Renato Colaferro, chief executive officer of Blue-Sol, a Ribeirao Preto, Brazil-based panel distributor that buys and installs equipment from Yingli and Suntech.

Tecnometal, the only Brazilian panel producer, expects to cut costs on panels once its factory in the southeastern city of Campinas reaches full capacity in 2013, said Renato Mangussi, director of renewable energy business. The facility opened in January.

“No country offers long-term financing for imported equipment,” Mangussi said by telephone from Belo Horizonte, Brazil. “If you want locally produced panels you have to come to us.”

To contact the reporter on this story: Stephan Nielsen in Sao Paulo at snielsen8@bloomberg.net

To contact the editors responsible for this story: Jessica Brice at jbrice1@bloomberg.net; Reed Landberg at landberg@bloomberg.net

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