Ceiba Energy – Power to Grow

Ceiba is a company focused on bringing power to Latin America, and with its latest project the firm is set to make a huge impact.

Founded in 2015, Ceiba Energy is an owner, developer, and operator of clean, sustainable power generation assets in Latin America. The company is fully backed by Denham Capital, a private equity outfit that focuses on three main sectors including sustainable infrastructure, energy resources, and mining.

“The way Denham Capital works is to partner with management teams that have significant expertise in specific regions or technology,” explains Emilio Vicens, CEO of Ceiba Energy. “We are one of those management teams. Our expertise is power. We’ve been working in emerging markets, and our mandate is to develop, acquire, own and operate sustainable power assets in Latin America through a combination of M&A activities and greenfield development, from Mexico to Chile.”

Ceiba’s management team brings a wealth of experience from a range of leading power companies to the table, along with a unique perspective.

“We look at things differently. We like to look for spaces in which we can add value to the markets in which we operate,” Vicens says. “There is no reason for us to simply be an additional player.”

Throughout the young company’s life, a major area of focus has been Brazil, which has received a significant amount of attention from Ceiba. Most recently that attention has yielded the Portocem Project, a large-scale LNG-to-power project in Brazil generating close to 1.6 GW.

A Brazilian Project

“Our large-scale LNG-to-power project in Brazil is unique from many perspectives,” Vicens points out. It will be a massive power, gas, and overall energy hub in Northeast Brazil and that is what makes it so attractive. There are very few opportunities like this in Latin America and, frankly, the world.”

Ceiba is not just looking for big projects in and of themselves, however. It also cares about the project’s impact on the wider economy, and the company itself.

The project will provide reliable and firm capacity to Brazil and support intermittent renewable energy in the region. It will also create up to 3,000 jobs during the construction period and up to 150 jobs during operation.

“We want projects that allow us to grow. We see this as about more than just power,” Vicens says. “We see it as a mid-to-long-term business that will generate significant value for the market going forward. The powerplant will lead to further activities, including a storage and regasification vessel at the port of Pecém. That would allow gas to come into Brazil from the end of the pipeline network, all the way in the northeast of the country, opposite to where the gas generally flows. Gas typically flows into Brazil from Rio de Janeiro all the way up to the Northeast. The further you are from the gas source the more expensive and difficult it is to source. We will on-tap significant growth potential in gas utilization for power and industrial customers across the region that is critical for development.”

The Portocem Project was initiated by a development partner before Ceiba purchased the project in 2019. Ceiba purchased the rights to the land, the right to access to the existing port, and the relevant environmental permits, but apart from that, the company was working from scratch to develop a project able to compete in the highly competitive Brazilian regulated power market.

“Since then, we have fully developed this into a credible, highly structured world-class project,” says Vicens.

The next thing Ceiba needed was to secure the necessary demand for the project with a Power Purchase Agreement (“PPA”).

“Typically, in Brazil, we have country-wide auctions to bid for PPAs. We participated in several PPA auctions, and finally, in 2021, we won close to 1,600 MW of capacity in the first of its kind capacity auction,” Vicens tells us. “What that means is that we’re now in a position to fully go ahead and build the asset which we’re contracting.”

A project on this scale needs an appropriate partner, and Ceiba Energy has found that in Shell, a world-class fuel supplier that brings to the table one of the strongest LNG portfolios in the world.

“We’re now finalising and discussing the terms of the agreement by which they will sell gas not only to our power plant but to potentially many other customers in the region as a whole using our infrastructure,” Vicens says.

As well as partnerships with multinational corporations, Ceiba is also working with a number of local infrastructure partners.

As Vicens points out, “We have a great relationship with the port, and there’s the industrial zone around the port that will bring tremendous value to the project in terms of better logistics. Thanks to all these partnerships we think we can be operational by mid-2026.”

Complementary Vision

This plant is meant to serve not just as a power source in its own right, but as an essential component in a combined solution to Brazil’s energy demand.

“This is a region that has a massive amount of wind and solar energy. A power plant like ours is the perfect complement because it adds stability to the system, allowing it to grow as much as needed,” explains Vicens. “We’re not running on a permanent basis, only when the system requires us to. With wind and solar there can be intermittency, days without wind, or nights with no sun. We’re a perfect backup. The region is also poised to be a larger centre of potential in the future of green hydrogen.”

Right now, Ceiba is finalising some key contracts including gas supply and equipment supply in the form of EPC and FSRU contracts and is planning for construction to begin in early 2023. By 2026, Ceiba hopes to have the largest power complex in Brazil.

Vicens believes the biggest obstacles to the project have already been overcome.

The biggest challenge is to obtain a large scale PPA, which we have done so already under a PPA auction supported by Denham,” he tells us. “Winning a PPA in Brazil is extremely challenging in the sense that the environment is significantly competitive. There is a very strict set of rules, and to compete and win you have to be extremely sharp in what you are doing. You must be very diligent in making sure that the costs are what they should be and that the project is well structured even prior to winning or tendering for the projects. You have to know what you are undertaking.”

In terms of Ceiba’s future undertakings, Vicens believes strongly in Brazil but is also looking to continue the firm’s operations across Latin America.

Our hope is to continue to grow, not only in Brazil, although Brazil will always be a significant market for Ceiba. We’re looking for other markets where we have significant assets and have worked well in the past with other companies,” says Vicens. “We’re familiar with having activities in multiple developing markets, trying to spread the risk around. We believe strongly in Brazil, but sometimes Mexico will be doing better, or Chile or Colombia or Peru. We continuously work and make investments and transactions across the region.”

As well as working across different markets, Vicens also has his eyes on a range of sectors within those markets.

“We’re not just a gas-generation company, we are heavily involved in renewables, including solar, wind and hydro,” he says. “This particular project is gas, but it is an extremely good complement to the renewable sector with a low environmental footprint. Some steel mills for instance still burn coal. They are looking into options to reduce emissions and we can help with that. We can also help with numerous other industries in terms of power generation and gas supply.”

The future is looking bright for Ceiba.

“We’ve got to build a 1,600-megawatt power plant on time and budget. We have several collateral projects to complete alongside that, but the most interesting aspect is that we have an opportunity to continue to grow over time,” says Vicens. “We can really develop the gas and power markets, and the energy market as a whole in the entire region.”

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