Opportunities in Brazil’s Civil Nuclear Energy Market
Q&A with Regina Cunha, U.S. Commercial Service, Brazil
By Felicia Strong-Persaud and Curt Cultice, U.S. Commercial Service, U.S. Department of Commerce
Brazil is Latin America’s largest economy and ranks among the top 10 largest economies in the world. Brazil is the United States’ 11th largest export market, accounting for $31.7 billion in U.S. merchandise exports last year. Although Brazil’s annual growth has slowed recently, U.S. firms in the nuclear energy sector-particularly small and medium-sized suppliers-would be remiss not to consider potential opportunities in Brazil’s civil nuclear energy market. In the below Q&A, Regina Cunha, Senior Commercial Service Specialist, U.S. Embassy, Rio de Janeiro, Brazil, discusses these opportunities. Cunha is part of the global U.S. Commercial Service network of 108 offices across the United States and in U.S. embassies and consulates in more than 75 countries that help U.S. companies export.
Q: Why should U.S. companies position themselves to do business in Brazil’s civil nuclear market if they aren’t already?
Cunha: U.S. companies should position themselves now in anticipation of a possible decision by Brazil’s government and its Congress to increase the number of new nuclear power plants (NPPs). While there is no clear indication that such a decision will be made in the short term, U.S. companies should consider monitoring developments in Brazil, and start surveying this market for potential Brazilian partners. U.S. companies like Westinghouse and General Electric-Hitachi, for example, already have a presence in Brazil.
Approximately 1 percent of Brazil’s energy is supplied by two pressurized water reactors at the Angra dos Reis NPP near Rio de Janeiro. According to the International Atomic Energy Agency’s PRIS Database, Angra 1 and 2 have 640 megawatt (MWe) and 1,350 MWe gross generating capacity, respectively. A third 1,350 MWe reactor, Angra 3, is under construction and expected to come online in 2020. Eletronuclear (ETN), a subsidiary of Eletrobras, is responsible for building and operating NPPs in Brazil.
Most significantly for U.S. suppliers, ETN recently indicated that it will invest about US $3.4 billion from 2016 to 2020. The investments include safety and other plant upgrades, work-related to the extension of Angra 1’s operation license for an additional 20 years, plant design modifications, equipment replacements, modernization of instrumentation and control systems, and upgrade of radioactive waste handling systems, including a new spent fuel dry storage facility.
Foreign suppliers do not need to preregister to participate in international tenders. Suppliers can check ETN’s Web site for tender announcements. If a foreign supplier has a Brazilian distributor, dealer, or legal representative, which is advisable, then they will register on behalf of the foreign supplier and be considered a domestic company. In this case, they will be paid in Brazilian Real currency when they win a tender. Information on how to register with ETN is available here.
Q: What kind of supply chain opportunities are there for U.S. small and medium-sized businesses?
Cunha: It is important to think regionally when considering supply chain opportunities as a small or medium-sized business. Brazil has two existing NPPs and one under construction, so opportunities for U.S. small and medium-sized companies are somewhat limited when compared to other countries in the region. However, since other Latin American markets have a nuclear operating fleet of five reactors (three in Argentina and two in Mexico), they have served as a good platform for U.S. companies to do business in Brazil as well. Westinghouse, for example, provides nuclear technologies to all three markets by providing technical services to these plants.
These companies may also rely on small- and medium-sized companies as part of the supply chain for their projects. All three countries are also involved in the development of new nuclear plants. Argentina started operation of its third nuclear plant in 2015 (Atucha 2), and Mexico’s government recently confirmed its plans to expand nuclear generation (Laguna Verde 3 and 4) by 2030, while Brazil is building its third reactor. Hence, there are opportunities for U.S. companies in the nuclear sector to participate in the growing demands of the region.
Q: What types of advantages might U.S. civil nuclear technology have over other foreign competitors?
Cunha: In 2014, as part of Brazil’s nuclear power project sponsor, ETN’s planning for future NPPs, ETN sent a request of information to several PWR suppliers, including U.S. company Westinghouse. While PWR technology will likely be adopted for the next NPPs, the strong U.S. position is constantly challenged by the ability of other state-sponsored vendors (France, China, Russia, and South Korea) to provide government-backed financing terms, which are very competitive in the marketplace. In any case, U.S. nuclear technology advantages include a reduced risk in developing new nuclear projects mostly due to the fact that the U.S. Nuclear Regulatory Commission (NRC) has licensed the technology. The U.S. NRC is considered the gold standard for nuclear safety around the world. Additionally, U.S. companies have unmatched experience in civil nuclear energy through the United States operating the world’s largest reactor fleet and generating the most nuclear power worldwide.
Q: What are some challenges that U.S. companies face in selling to Brazil?
Cunha: Any U.S. company doing business outside the United States will face challenges. The Latin America region has faced economic downturns recently, which have impacted all state-owned nuclear utilities. With reduced budgets, unstable exchange rates, and political instability, these aspects have resulted in additional short-term challenges for U.S. companies to be successful in growing their business in the region. In addition, complex bureaucratic processes, long decision-making processes, and focus on local content are also key factors for U.S. companies to deal with.
Q: What are some key market entry strategies?
Cunha: In anticipation of a possible decision by the Brazilian government and the Brazilian Congress to increase the number of new NPPs, U.S. nuclear power technology suppliers should start looking for potential Brazilian partners. In addition to the complexities of doing business in Brazil, local content regulations will require that foreign suppliers associate with domestic suppliers either to partially manufacture in Brazil or to build a supply chain with local domestic suppliers. Additionally, Brazilian legislation mandates that services can only be provided by a locally established company, and U.S. service suppliers will need to consider joint-venture partners or open their own service branch in Brazil. The U.S. Commercial Service can help U.S. companies with these tasks.
Q: Based on your experience, what are some lessons learned from U.S. companies doing business in Brazil and Latin America in general?
Cunha: In order to be successful in doing business in Latin America, U.S. companies should demonstrate both traditional as well as customized approaches in driving their value proposition. Just as in other global markets, U.S. companies need to offer innovative, competitive technology solutions that can help nuclear utilities in the region continue to provide safe, clean, and reliable electricity with good plant performance. In addition, U.S. companies should also establish a visible and engaged local presence in order to demonstrate full and long-term commitment to the local market. U.S. companies should look to develop strong local partnerships, and, whenever feasible, engage local universities and research institutions.
Q: What are some key export tips that a U.S. business should know?
Cunha: Given the recent economic situation in Brazil, U.S. small and medium-sized companies should be cautious when engaging with local suppliers, including selected EPCs. A due diligence process is highly advisable to avoid problems. The U.S. Commercial Service provides international company profile reports on local companies.
Q: Brazil’s Long-Term Energy Plan has not yet been published. Have you any idea what it might entail?
Cunha: Brazil’s Long-Term Energy Expansion Plan (PNE) is an integrated energy resource planning study that the state-owned Brazilian Energy Research Company (EPE) publishes. It includes strategic planning for the Brazilian power sector as well as other energy sources such as oil, natural gas, and biomass. The last PNE 2030 was published in 2007. EPE is now working on the several chapters that will be part of the PNE 2050. It has recently disclosed a link for the PNE 2050 Economic Scenario Section, one of the five studies of the PNE 2050.
Q: How can the U.S. Commercial Service assist U.S. civil nuclear suppliers?
The U.S. Commercial Service’s global network provides export counseling, market intelligence, business matchmaking, and support to U.S. participants in trade shows, as well as other customized services. For more information, visit www.export.gov. On the site, businesses can locate their nearest U.S. Commercial Service office in the United States, U.S. Commercial Service in Brazil, and Country Commercial Guides. In addition, the U.S. Department of Commerce’s Office of Energy and Environmental Industries (OEEI) provides expertise on nuclear-related energy issues for different global markets. OEEI’s annual Civil Nuclear Top Markets Report discusses key trends, areas of opportunity, and important challenges facing U.S. civil nuclear energy exports through 2028.
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