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Conduit Capital Invests $50M+ In Brazilian Hydro-Power

By Jonathan Shieber

10/31/2008 - As part of a broader shift to investment in renewable energy, Conduit Capital said it invested over $50 million for a 50% stake in a developer of small-scale Brazilian hydropower projects.

The New York-based private equity firm made the investment in Brazil's GLEP Energias Renovaveis e Participacoes SA to take advantage of opportunities it sees in the wake of the global financial crisis, said Conduit Chairman J. Scott Swensen.

"It has created an opportunity to buy some projects," Swensen said, speaking of turmoil in world financial markets. "There is no bank financing today. Zero."

If most banks are pulling out of the market, then it's a good time for private equity investors to step in, Swensen said. That's because Brazil's development bank is still active and willing to provide financing for renewable energy deals in the country.

GLEP Energias Renovaveis e Participacoes SA already has two projects under development with a total of 46 megawatts that have already been contracted. And the company has an additional 22 projects in various stages of development with another 365 megawatts of generating capacity.

In a statement, Conduit said that the funds from the investment will be used to complete the existing projects, fund future capital needs and develop the project pipeline.

"We are excited about the future of the renewable energy sector in Brazil, which is very active," George Osorio, a Conduit managing partner, said in a statement. "Small hydroelectric plants receive favorable treatment because they have strong social benefits with minimal environmental impact."

Approximately 70% of Brazil's installed power generation capacity comes from hydropower, and although the projects will have a certified emissions-reduction credit associated with them, they are not worth as much on the world markets. Brazil gets so much power from renewable sources that new offset credits are worth less than those from countries that depend more on traditional sources of power.

The two projects that are already under development, PCH Piedade and PCH Santa Luzia Alto, are expected to be completed in mid-2009, the company said in a statement.

PCH Piedade is located in the state of Minas Gerais, and PCH Santa Luzia Alto is located in Santa Catarina. Other projects in the existing portfolio are expected to come to capacity between 2010 tand 2012.

Two brothers who run the Brazilian hydroelectric power developer, Carlos and Guilherme Lourenco, will keep their titles of chief executive and chief operating officer, respectively, of GLEP. Conduit has added a new chief financial officer, Marcelo Vandelli, who represented Conduit in another Brazilian investment in its Latin Power II fund, the company said.

Following this investment Conduit's Latin Power III fund is 50% committed, the firm said, but it continues to pursue renewable opportunities in Latin America.

"We think there's a phenomenal opportunity for renewables," Swensen said. "Our focus is making money on a risk-adjusted basis, and at this point renewables make a lot more sense than fossil fueled power plants."

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