By Marcelo Teixeira and Luciano Costa
SAO PAULO (Reuters) - Spanish conglomerate Abengoa, teetering on the verge of bankruptcy, has halted construction of power transmission lines in Brazil, a potential setback for the South America nation's bid to emerge from its worst energy crisis in 14 years.
Unions representing construction workers, a wind power industry group and Abengoa's sub-contractor on the new power lines said the Spanish company informed them of the interruption in recent days.
Abengoa, which opened pre-insolvency proceedings last month in Spain, holds concessions to build and operate 6,300 kilometers of transmission lines in Brazil that are vital to connecting dozens of wind farms to the grid.
It is also due to construct a line to transport power from the word's third-largest hydroelectric power dam, Belo Monte, in the Amazon state of Para to Brazil's power-hungry Northeast region starting in August.
"Work was suspended suddenly and we don't have any information at this point about a possible resumption," said Janaina Voltolini, a director at ETS Energia, a company providing services for Abengoa on four out of 11 new lines under construction.
Abengoa declined to comment on the matter. Sources familiar with its restructuring in Spain said the company plans to stop all projects that are not yet operational and require additional investment.
That decision would also affect Abengoa`s operations in Chile, where the company won a $180 million contract last month to build two new power transmission cables, extend existing lines and construct a substation.
In Brazil, years of below-average rains have sharply reduced power output from the country's extensive network of hydropowered dams, forcing the government to seek new sources of energy, from thermal to solar and wind.
Roberto Brandão, a power sector researcher at Rio de Janeiro Federal University (UFRJ), said Abengoa was the largest player in construction of power lines to connect to these power sources, alongside China's State Grid [STGRD.UL].
"We can expect all of them to be delayed," he said. "And possible solutions will be found on a line-by-line basis."
Elbia Gannoum, chief executive at Brazilian wind power lobbying group Abeólica, said the situation is worrying.
"There is around 1.5 gigawatt of new power capacity from wind farms depending on those lines," she said, an amount that could supply 3 million people with electricity in Brazil - or roughly 1.5 percent of the population.
The Brazilian transmission lines will require around 1 billion euros in investment, Abengoa executives said in a September presentation.
Brazil's electricity regulator Aneel held an emergency meeting last week to discuss the situation with Abengoa representatives but it later said no obvious solution had been found.
Robertson Emerenciano, a lawyer who specializes in restructuring power companies in Brazil, said Abengoa would probably want to sell its concessions, an outcome local governments are likely to support.
"For the government it is very important to maintain those investments," he said.
The bad news for Abengoa is that the timing for such sales could hardly be worse. Available credit in Brazil has shrunk amid a harsh economic crisis, making infrastructure investments tough to finance.
In a Nov. 18 auction for concessions to build and operate power lines, the government sold only four out of 12 lots on offer.
(Additional reporting by Julien Toyer in Madrid; Editing by David Gregorio)