Marco Dopico, President Director, Denge Engenharia, Brazil
Marco Engenharia, Founder and President Director of Denge Engenharia, talks about his decision to create Denge Engenharia, what the future of hydropower in Brazil looks like, and why he thinks the recent market downturn is merely temporary.
Before you started as Director President, I understand you were an independent consultant and specialized engineer. What brought you to Denge, and what key experiences prepared you to lead Denge?
I began my career in the late 1970’s, working in a Japanese manufacturer located in Rio de Janeiro, which still exists today in Japan. This experience gave me the knowledge, skills and expertise to manage a wide array of equipment. With time I gained a solid engineering background necessary to deal with projects such as we have today.
With regard to consulting, I specialized over five years in the mid 80’s on hydropower plants working for a large Brazilian engineering company. At that time we worked on many hydro projects—Corumba, Samuel in Rondonia—and open field projects. This period was also marked by economic difficulties for Brazil. Many projects were being abandoned and I decided to leave this engineering company to start my own consulting and engineering business, Denge Engenharia. This new company was ideal to support hydro projects with renowned engineering clients. Through time we started growing our operations and human capacity, specializing in engineering services. After completing many projects, we saw an opportunity to grow further by building and assembling our own equipment. This wave became even more competitive in the energy market.
In the end, our customers want a tailor-made solution, and only through our knowledge of manufacturing and assembling equipment could we respond to their expectations. Clients want their suppliers to be responsible for what they provide. We bring them responsibility and expertise.
Our success over the years is merely a reflection of the satisfaction of our clients, as every new project was gained by previous clients recommending our work. Building momentum and accruing further projects is a difficult task for most service providers. At Denge Engenharia, however, we are really satisfied with our accomplishments in such a short period of time.
Denge Engnharia is mainly focusing on hydropower, Brazil’s biggest market, accounting for 70 percent of the power sector here. What is your vision of the potential of hydropower?
The future of hydropower in Brazil fundamentally depends on the tariffs set by the government. Our clients have large quantities of hydro projects on hold in their portfolio, awaiting concession approval and clarification of new regulations. These projects have a long-term perspective with PPA’s Power Purchase Agreements for 30 years. A return on investments, however, as well as environmental licenses, is difficult to retrieve and may take up to 10 years. Therefore a 30-year concession contract may in reality only represent 20 years profit. For this reason, sometimes concessions are not renewed and the company loses a very large asset.
Concerning the type of hydro with potential for growth in the future, the situation is uncertain. In the past, small hydropower plants, less than 30 MW, grew rapidly because the government was supporting their growth with plans like Proinfa—the incentive plan for alternative electric energy sources. Through BNDES the government has reinforced the energy sector by providing companies with long-term financing and security. Moreover, private enterprises have also benefited from the predictability derived from BNDES, which is helpful, as private initiative requires less government involvement.
With the new auction system, using the hybrid power model, it seems that large hydropower plants are preferentially treated to the smaller ones. I consider that in the future large hydro projects will be prioritized over smaller ones.
Regardless of which hydro will prevail in the future, one thing will remain: Brazil as a leader in hydro innovation and equipment. What is your reaction towards the level of expertise and innovation here?
Brazil’s expertise and innovation in hydropower certainly stands out among other countries. For instance, Itaipu is the third biggest hydro dam in the world in terms of generating capacity, and this iconic project is already part of our historical success in dams.
All of our dams are supported by major manufacturers, service providers and equipment specialists, providing high-end solutions to our dams. Collaborating with them, Denge Engenharia’s local expertise and heritage can assist Brazil’s hydro in remaining at the edge of innovation for decades to come.
Among your portfolio of projects in hydro, Denge seems to be prioritizing small hydro projects. Besides small hydro, which other projects is Denge Engenharia looking into?
In fact, we are capable of working on any type of plant, from very small to very large projects. Although our internal resources and limited manpower restricts our capabilities, we are capable of partnering with other companies to complement the resources needed for larger projects.
It is true however that in the past, 80 percent of our projects were concentrated on small hydro plants. Of course in terms of financial benefits, working on medium to large hydro projects is better than small ones. Since the equipment used on small hydro plants are the same as on the large ones, it is only logical that working on larger equipment brings a higher financial return. More precisely, where the money lies is not on the engineering part, but on the fabrication and therefore this is our core interest.
Tudelandia represents one of Denge’s main projects in hydro. Could you give us an insight of some of the challenges you had in sustaining this project?
This project for us was a real pilot project, full of useful lessons. Through this project, we stood on the entrepreneurial side, playing a fundamental role in communicating to the different stakeholders—large distribution companies, BNDES, environmental bodies, CCEE, Etc. This entrepreneurial side was new to us, and gave us a very good insight on the necessary requirements and challenges linked to new business ventures.
From the lessons learned in this project, and your expertise in hydro projects, where is Denge Engenharia to invest in the next five years?
We are looking into different markets such as the marine sector and petrochemical industries. We have already contacted clients in these areas and are awaiting the conditions and requirements to start manufacturing and assembling equipment for them.
The reason for our diversification strategy is derived from the lack of new hydro projects the last three years. The hydro market has been on hold since early 2011. Very few projects have started since then and this resulted in our principle hydro-related work being the completion of existing projects. It is our priority to invest in other sectors and our expertise allows us to be flexible to work in these new areas.
Of course our history lies in hydro projects; therefore, we wish to remain strong in this field. All we need is for new projects to start. We can quickly become active again on this front. I feel confident in the future of hydropower and we are just experiencing a temporary downturn in this market. I have no doubt Denge Engenharia’s reputation as one of the best contractors for hydro projects in Brazil will be proven again and again in future.