Jose Luis Menghini, Executive Vice President, IMPSA, Brazil
Jose Luis Menghini, Vice President of IMPSA, talks about what it takes to be considered as a local company in Brazil, why Brazil is an excellent place to invest in wind power today, and how IMPSA works to differentiate itself from other companies in the market.
IMPSA is a family owned Mendoza-based Argentinean company with over 100 years of history. What did it take for IMPSA to become a key Latin American company, with global operations? How did the company overcome Argentinean-Brazilian cultural differences?
IMPSA first stepped beyond Argentina in the 1970s, and our first operations took place in Paraguay, Uruguay and Colombia. In the early 1980s we started to focus on Brazil at a time when discussions on Mercosur, an economic and political agreement between Argentina, Brazil, Paraguay and Uruguay, brought new business opportunities between these countries. For the past three decades we have been investing in Brazil and building momentum in a country where opportunities exist but which demand time and effort to grasp.
In fact, cultural differences exist, as one country is more Italian or Spanish in culture where the other has Portuguese roots. Hence, historically these two countries evolved distinctly. However, as Latin Americans we share a sense of community and in Brazil we did not have any issues being considered as anything but locals: if you invest, take risks locally and believe in the rules of engagement, you slowly get a sense of localism.
With five business units targeting hydro and wind, IMPSA is a specialist in renewable energies. What is the split between the different business units and what have been the challenges in establishing a strong footprint in both sources?
Internally, we believe that what separates wind from hydro is the density of the fluid. We like to consider both of these sources as equal. In terms of revenues in our Latin American operations, wind has a slight advantage, and this year wind represented 55 percent of revenues; however, every year there are variations. In Brazil, the results are similar.
We have a strong tradition in hydro and a relatively new tradition in wind. However both sources are equally important. Brazil’s know-how and tradition in hydro is the best in the world. Sadly, internationally Brazil has been condemned and heavily criticized for violating human rights and indigenous territory; but the reality is different. Brazil has actually been investing in the most developed social, environmental and economic projects of the areas surrounding hydropower plants. This is the reality.
Brazil’s resources in wind power are unique both in quality and in quantity, yet this energy represents a small share of the energy matrix (around 2 percent). What opportunities did IMPSA see as an early adopter of this source?
Without question, Brazil’s wind potential is excellent. Nonetheless if we look at wind speed conditions in the Northeast of Brazil, where the wind is best, results indicate between seven to nine meters/second. In Argentina, more precisely in Patagonia, wind speeds vary between nine and 14 meters/second. Of course, wind speeds are not the only criterion to take into consideration, as we must look at turbulence, steadiness and other factors. Overall, Brazil offers great conditions to settle our wind farms and this is why we decided to invest heavily in this market early on.
IMPSA became the first, and until now the only, manufacturer of wind-powered generators with BNDES-approved equipment. What is the key factor that allowed for this achievement and does this differentiate IMPSA from competitors like Weg and Vestas?
When BNDES analyzed wind manufacturing facilities for generators they realized important discrepancies: there were two sides of the coin. On the one hand they found low standard facilities fabricating generators with poor engineering conditions and levels of fabrication and technology. On the other hand, our facility had advanced state of the art technology (which we developed locally), and high levels of safety and environmental standards. Therefore BNDES’s decision to grant us with this recognition was only logical and fair on paper, but we sincerely appreciate their recognition and their support in helping us in defining our strengths as a local player in Brazil.
In terms of competition, most of our competitors transfer technology. We opted to develop our technology and products locally to meet standards and gain local expertise to adapt our products to the specific requirements of the market. Even competition with large international companies is fierce but we stand firm on our capacity to bring the best technologies to our customers.
Overall, we are an extremely transparent company and transparency is always an asset. We interact with our customers and provide them with our perspectives on the solutions they need. Also we do not solely focus on our return on investment but on our customers’ as well, and having this close relationship and attention to a customer makes us unique.
IMPSA has recently invested approximately USD 116 million in a wind turbine plant in the south of Brazil, in addition to its two plants located in Pernambuco producing equipment for large-scale hydropower plants and wind farms. What will be their strategic importance for the group?
Our investments in these plants show our faith in Brazil. Not only are we ensuring transparency and our commitment to the rules and regulations in place, we also believe in Brazil as a strong platform to export internationally. In this sense, Brazil has a better exporting platform than other Latin American countries.
Looking ahead at IMPSA’s five-year expansion plan to develop its activities across Brazil and Latin America, what shall we expect?
We shall invest in power electronics, mostly focused in high-density drivers. The reason behind this new investment is because we believe this will complete our solutions in smart grids, training, O&M and create synergies between the different business units.
In terms of wind and hydro projects, both units will keep growing. In the area of hydro we hope to work on projects similar to Belo Monte, Brazil’s second biggest hydropower plant. As for wind, our objectives are to maintain a growth of 1.5 to 2 GW every year. We will continue bringing reliable products, differentiating our products from European and International competitors and making sure that our Brazilian approach is consistent with the demand of our global operations.
From a financial standpoint, we are looking into incorporating our company in Luxembourg to optimize our overall operations focusing on financial, governance and administrative points. This is a step towards making IMPSA a truly global company.