Taking stock: Becoming a player in the Brazilian power sector

Daniel Chen, general counsel at EDP Energias do Brasil, speaks with Michael Washburn about the company’s IPO and expansion, and doing business in Brazil’s energy sector

How have your operations changed since listing your capital on the São Paulo Stock Exchange in July 2005?

Back at the time of our listing, we had 530MW of installed capacity; now we have roughly 2700MW. We have grown many times since 2005, in addition greatly expanding in terms of energy distribution to our consumers. We have also traded more energy within these 10 years.

Has your distribution expanded in the states of São Paulo and Espirito Santo?

Before 2005, we had three distribution companies. Although we sold one, currently we distribute the same amount of energy with two distribution companies: one in Espirito Santo and one in São Paulo.

Do you face any serious competition in Brazil’s energy markets?

We do not see ourselves as having significant competition. We have competitors but since it is a regulated industry, what we have are companies similar to us in terms of the value chain. The business units we have are generation, distribution, and commercialisation. We consider ourselves as an integrated company. Similar to us in terms of our structure is CPFL and CEMIG. They are an integrated companies as we are.

Are there any regulations or other challenges that you feel hinder effective distribution?

There are challenges; however, we understand regulation has a lot to do with being more efficient. Other factors have also affected the distribution business. One example being, the consumption of energy has fallen owing to the general economic situation. Another is that the tariffs have increased, which has influenced the amount of energy people are consuming.

How often do you engage external legal counsel? What type of work would you typically instruct a law firm on?

We do work with outside counsel, both local and international. On the international side, we generally hire Allen & Overy, Clifford Chance, and Paul Hastings. For local counsel, I would say we work with several of them, but most often with Souza Cescon, Pinheiro Guimarães, Tauil & Chequer, Pinheiro Neto, Madrona and Hong (MHM). We engage global law firms to assist us generally for international financing matters, for example, project finance.

What do you look for when you choose outside counsel?

They have to be specialised, know the sector well. In addition, nowadays availability is very important. We need our outside counsels to be available to assist us whenever we call them.

Do you prefer hourly or fixed rates?

We prefer fixed rate fees because we can better organise ourselves in terms of cap of expenditures. However, we know that certain matters cannot be capped. Therefore, exceptionally we can accept to work with law firms with hourly rates.

What course do you see EDP’s operations taking in the next two years?

We have two projects with construction ongoing. Our focus in the next two years is to complete these projects on time and on cost. Last year, we completed a project on time and on cost, anticipating its commercial operation in three months. To complete projects on time and on cost in Brazil is not something usual.

The project we anticipated the commercial operation mentioned above in relation to our concession agreement is Jari project, which is a Hydro Power Plant of 374MW. For 2016, we have a project of 219MW called Cachoeira Caldeirão, which we are working hard also to anticipate its commercial operation in relation to its concession agreement deadline in January 2017. 

Daniel Chen
General Counsel
EDP Energias do Brasil
São Paulo

Biography

Daniel Chen is general Counsel at EDP Energias do Brasil, the Brazilian arm of Portuguese energy group – EDP Energias de Portugal. He has been with the company since 2009. He is a corporate lawyer and includes in transactional work, including M&A, and commercial litigation among his skills.

Before joining EDP, Chen worked in private practice at Noronha Law Firm and Baker & Mckenzie – spending his time at both firms between São Paulo and Shanghai – and later at Lobo & de Rizzo Advogados in São Paulo.