The Privatization of Brazil`s Electricity Sector

Transcrição

Bernardo Kucinski
The Privatization of Brazil’s Electricity Sector
Special
Syndicated Intelligence Report
THE PRIVATIZATON
OF BRAZIL’S
ELECTRICITY SECTOR
By Dr. Bernardo Kucinski
São Paulo, Brazil
Latin American Information Services, Inc.*
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Tel 212-765-5520 Fax 212-765-2927
*Publishers of Lagniappe Letter & Lagniappe Quaterly Monitor
and Lagniappe Montly on Latin American Projects & Finance
COPYRIGHT 1995 LATIN AMERICAN INFORMATION SERVICES, INC.
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WELL AS LIABILITY FOR SUBSTANTIAL MONETARY DAMAGES.
1995
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Jornalismo Econômico
Ficha Técnica
Publicação Original
1995 - Latin American Information Services, Inc.
Autor
Bernardo Kucinski
Editoração Digital
EccentricDuo
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Contents
CHAPTER I:
EXECUTIVE SUMMARY
A Three-Tier Program.......................................................................................................2
Electricity Sector Politics...................................................................................................3
The Regulatory Framework...............................................................................................3
A Preference For Hydroelectricity.....................................................................................3
Reshaping Eletrobras........................................................................................................3
Strong Demand Expected.................................................................................................4
The Regulatory Bottleneck ...............................................................................................4
The New Concessions Law................................................................................................4
Tariff-Setting Rules...........................................................................................................5
Tariff Worries....................................................................................................................5
The Thermoelectric Option...............................................................................................5
Gas For Sao Paulo.............................................................................................................6
Coal For Minas Gerais And The South.............................................................................6
Gas For The Amazon Basin...............................................................................................6
Independent And Self Production.....................................................................................6
Selling Off Eletrobras.......................................................................................................13
Privatization Bottlenecks..................................................................................................13
Privatization Of State Utilities..........................................................................................13
Sao Paulo’s Plan...............................................................................................................14
Rio de Janeiro..................................................................................................................15
Minas Gerais....................................................................................................................15
Privatization Of Individual Plants....................................................................................15
CHAPTER III
THE LEGAL FRAMEWORK FOR ELECTRICITY SECTOR PRIVATIZATION
Summary.........................................................................................................................18
Political And Historical Background................................................................................18
Building On Earlier Studies.............................................................................................18
Revising The Constitution...............................................................................................19
Legislative Scorecard........................................................................................................19
Tariff Breakthrough.........................................................................................................20
Private Producers Authorized...........................................................................................20
Bringing Paralyzed Plants Back To Life............................................................................20
Key Features Of The Concessions Law.............................................................................21
Concessions Regulations Passed.......................................................................................22
Setback For SelfProducers................................................................................................22
Constitutional Challenge.................................................................................................22
Environmental Protection................................................................................................23
Summary Of Principal ElectricityRelated Laws................................................................23
CHAPTER II:
THE SCOPE AND LIMITS OF BRAZIL’S ELECTRICITY PRIVATIZATION
Summary..........................................................................................................................9
The Broad Game Plan.......................................................................................................9
Historical Background.....................................................................................................10
The 1970s Tariff Meltdown..............................................................................................10
Long-Term Planning........................................................................................................11
The 1993 Recovery..........................................................................................................11
Rules For Transmission....................................................................................................11
Financial Gap..................................................................................................................11
Goals Of The TenYear Plan..............................................................................................12
The Shape Of Eletrobras’ Privatization.............................................................................12
Rules For Transmission....................................................................................................12
Progress To Date: The Escelsa Sale..................................................................................12
CHAPTER IV
THE ELECTRICITY MARKET AND ELETROBRAS’ PLAN 2015
Summary.........................................................................................................................25
The Hydroelectricity Bias.................................................................................................25
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Recasting The Tariff Adjustment System..........................................................................43
Lower Subsidies...............................................................................................................44
Question To Be Resolved.................................................................................................44
The Stabilization Plan Threat...........................................................................................45
The Power Inventory........................................................................................................25
The Electricity Markets....................................................................................................26
The Demand Side............................................................................................................28
Eletrobras’ Scenarios........................................................................................................28
Will There Be A Shortage?...............................................................................................29
Integrating National And International Grid Connections...............................................30
CHAPTER VIII
THE THERMOELECTRIC OPTION
Summary.........................................................................................................................48
Historical And Technical Background..............................................................................48
Thermoelectricity Mooted For The Northeast..................................................................48
Gas And Coal..................................................................................................................49
Urucu Gas For The Amazon............................................................................................50
The BoliviaBrazil Pipeline................................................................................................52
Slow Expansion...............................................................................................................52
Projects Under Consideration..........................................................................................53
Pipeline Obstacles ...........................................................................................................53
Outlook...........................................................................................................................55
Other Thermoelectric Projects.........................................................................................55
The Gaucho Pipeline.......................................................................................................55
Southern Coal..................................................................................................................56
Supply Agreement Signed................................................................................................56
The Role Of Thermoelectricity In Plan 2015...................................................................57
CHAPTER V
KEY POLITICAL PLAYERS
Summary.........................................................................................................................33
The PFL Profile ...............................................................................................................33
CHAPTER VI
MODERNIZING THE REGULATORY STRUCTURE
Summary.........................................................................................................................36
Historical Background.....................................................................................................36
Scant Resources for DNAEE............................................................................................36
A New Independent Regulatory Agency..........................................................................37
A Role For The States.......................................................................................................37
Call For Consultants........................................................................................................37
Environmental Protection................................................................................................38
The Gas Regulation Bottleneck .......................................................................................38
Outlook For The Regulatory Reform...............................................................................38
The Energy Conservation Program..................................................................................39
CHAPTER IX
SELF-PRODUCTION AND INDEPENDENT PRODUCTION: A SUMMARY OF RECENT
AND UPCOMING PROJECTS
Summary.........................................................................................................................60
Historical And Political Background................................................................................60
Legal Considerations........................................................................................................61
Conflicting Goals.............................................................................................................61
Tariff Questions...............................................................................................................62
Special Legislation............................................................................................................62
Some Winning Bids.........................................................................................................63
Transfer Of Power Plants To Consortia............................................................................63
CHAPTER VII
HOW THE TARIFF SYSTEM IS STRUCTURED
Summary.........................................................................................................................41
Historical And Political Background................................................................................41
The New Structure...........................................................................................................42
Application Process..........................................................................................................42
Protest Against Tariff Tax.................................................................................................43
Tariff Criteria For Public Service And SelfProducers........................................................43
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Distribution of Bolivian Gas............................................................................................52
Rio Grande do Sul Coal...................................................................................................56
Coal-Fueled Thermoelectric Plants On the Drawing Board..............................................57
Profile of Energy SelfProducers........................................................................................61
SelfProduction Prospects Under the 2015 Plan (TWh)....................................................61
The 20 Largest State-Owned Utilities ..............................................................................70
State Power Sector Ratios.................................................................................................71
Sistema Eletrobras............................................................................................................72
Eletrobras Financial Return Statement, 1994...................................................................72
Other Plants On Offer.....................................................................................................64
Concession Confusion.....................................................................................................65
Self-Producer Projects......................................................................................................66
New Concessions.............................................................................................................66
CHAPTER X
A PROFILE OF THE MAJOR ELECTRIC UTILITIES
Summary.........................................................................................................................70
The Ownership Network.................................................................................................70
The Eletrobras System......................................................................................................71
Eletrobras Generators.......................................................................................................72
The Privatization Of Light...............................................................................................74
The Sao Paulo State Concessionaires................................................................................74
CHARTS
Brazilian States.................................................................................................................78
Power System...................................................................................................................79
Path of the Proposed Bolivian-Brazilian Gas Pipeline.......................................................80
ANNEX I — Concession for Exclusive Use Hydroelectric Plants....................................81
ANNEX II — Power Projects To Be Offered in Public Bidding.......................................85
TABLES
Investment Requirements, 1995-1998.............................................................................12
Existing Capacity.............................................................................................................26
Projected Additional Capacity..........................................................................................26
Energy Market (1994).....................................................................................................27
Consumption by Sector (1994)........................................................................................28
Energy Scenarios of Plan 2015.........................................................................................28
Electricity Demand by 2015............................................................................................29
Regional Participation (Consumption)............................................................................29
Rates of Growth of Electric Energy Demand by Region...................................................29
Capacity and Investments Needed to Meet Scenario III...................................................29
Electricity Requirements In the Year 2015, by Sub-Systems.............................................30
Average Tariffs and Share of Energy by Classes of Consumer............................................42
Residential Energy Consumption.....................................................................................45
Electricity Tariffs in Sao Paulo..........................................................................................46
Escelsa’s Proposed Residential Tariff.................................................................................46
Brazil’s Oil and Gas Reserves (1993)................................................................................49
Natural Gas Production...................................................................................................50
Bolivian Gas Reserves......................................................................................................52
USEFUL ADDRESSES AND TELEPHONE NUMBER..............................................88
GLOSSARY OF NAMES OF KEY BUSINESSES, GOVERNMENT AGENCIES AND
COMPANIES.................................................................................................................91
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Chapter 1
THE PRIVATIZATION
OF BRAZIL’S ELECTRICITY SECTOR
Executive Summary
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Bernardo Kucinski
Executive Summary
Brazil’s enormous electric power industry with an asset base of around
US$100 billion has been set on an irreversible privatization course.
However, the process is expected to take years. The final model will likely
be one of mixed ownership in which the states especially retain a great deal
of influence.
will be divided into six generating companies, 13 distribution companies
and one unified transmission company. Only transmission will remain
under state control.
The state governments’ best managed electricity utilities, such as Cemig
of Minas Gerais and Copel of Parana, are not slated for privatization.
However, they will join forces with private capital because they need an
injection of funds to speed up their investment programs.
A Three-Tier Program
The third level of electricity privatization entails full or partial private
participation in individual power plant projects. This process is already
going ahead full steam. Private participation is the government’s emergency
plan to ensure that half-built or paralyzed plants are brought on stream
even before the power sector is restructured. Some US$4.2 billion in
private capital is needed immediately for this program. Nine half built
plants belonging to state utilities and to Eletrobras subsidiaries are on offer
as partnerships with private consortia.
The process has been structured in three tiers. At the top, under the
National Privatization Program, is the privatization of Brazil’s four large
federal power generators: Chesf, Furnas, Eletronorte and Eletrosul, with
total assets topping US$39 billion. All four are controlled by federal
holding company Eletrobras. Distribution utilities Light, of Rio de
Janeiro, and Escelsa, of Espirito Santo, (sold in July to a consortium led
by the IVEN group and 11 large pension funds) are also included in the
program.
Simultaneously, the government is pressing ahead with a plan to offer
power plant concessions to private developers. Between 1995 and 2004,
up to 72 such concessions will be offered in public bidding. A first round
comprising seven plants is scheduled for the end of 1995 or early 1996.
About half of the concessions to be offered were previously held by state
government utilities, but were never implemented. President Fernando
Henrique Cardoso canceled the state concessions in March 1995. Among
them are concessions for 10 thermoelectric plants, including six to be
fuelled by the Bolivia Brazil gas pipeline, currently in a preliminary study
stage.
The second tier is at the state level, where progress is likely to
be sporadic because not all state governors are of one mind about
privatization. For example, Rio de Janeiro governor Marcelo Alencar
is anxious to proceed and has already asked the state assembly
for authorization to auction its controlling stake in Companhia
de Eletricidade do Rio de Janeiro (CERJ) and state gas company
Companhia Estadual de Gas (CEG). Their combined assets are US$180
million.
Sao Paulo state governor Mario Covas is not anxious to privatize, but is
being forced to because of financial necessity. The three Sao Paulo state
utilities, Eletropaulo, Cesp and CPFL, with US$16 billion in total assets,
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Electricity Sector Politics
which means no project will be cleared by any government agency unless
full environmental protection criteria are met.
Brazil’s electricity sector at the federal level is firmly under the control of
the Liberal Front Party or PFL, which is also strongly influenced by some
of Brazil’s largest building contractors. The PFL is a principal player in the
governing coalition, which, of course, also favors privatization. The power
technocracy at the state level, however, is very strong, and even following
a substantial degree of privatization, it will have a major influence on how
power projects are carried out.
A Preference For Hydroelectricity
The preeminence of hydroelectricity in the power panorama will prevail.
More than 38% of the energy produced in Brazil takes the form of
electricity, and 93% comes from hydroelectric plants. The economics of
hydroelectricity, therefore, dominate and determine pricing policies and
the marginal costs of expansion plans.
The Regulatory Framework
Reshaping Eletrobras
Under the electricity restructuring program, the Mining and Energy
Ministry (MME) is preparing to strengthen state regulatory authorities
substantially and also to upgrade the principal federal regulatory agency,
the Departmento de Aguas e Energia Eletrica (National Department of
Water and Electrical Energy, or DNAEE). The environmental protection
agency, Instituto Brasileiro de Meio Ambiente (IBAMA), is also to be
strengthened. But skeptical officials do not believe that DNAEE will ever
be able to act independently of the large state power companies. Instead
the reforms will probably strengthen the influence of regional politicians
and state governors on the electricity sector, as well as that of state
electricity companies.
The federal government is planning to privatize generation and final
distribution, possibly by creating smaller units in order to stimulate
competition. Eletrobras subsidiaries will be split into separate units
devoted to generation, transmission and distribution. The transmission
units will then be regrouped to form a national system that will be kept
under government control and will be open to all utilities and consumers.
The plan also calls for a two tiered energy market involving long term and
spot contracts.
Restructuring of Sao Paulo’s three state utilities — Cesp, Eletropaulo and
CPFL — is considered a prerequisite for the restructuring of the federal
system because of the three companies’ key position in distribution.
The new environmental protection policy demands strict obedience
to regulations and incorporates a wide range of social, cultural
and environmental concerns that would have an impact on power
development. The government may soon introduce a “Green Stamp,”
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Strong Demand Expected
Nevertheless, private companies are anxious to get involved. They are
operating under the assumption that the authorities are acting in good
faith and simply lack the time to create a comprehensive legal framework
prior to actual privatization. They believe the only way to proceed is to
take some risks and help to improve legislation so that the final outcome
offers sufficient guarantees. In short, the legal environment is considered to
be transitional, but heading in a positive direction.
This report assumes an annual rate of economic growth in the range of
5% to 6%, under the assumption that growth over 6% p.a. is incompatible
with maintaining equilibrium in the balance of payments and will
therefore be repressed. Under the most probable scenario, with a 5.2%
average annual increase in GDP, electricity production will have to treble
to 730 TWh by the year 2015. Installed capacity would have to reach
74,000 MW by year 2000, compared to 58,686 MW in 1995. Thus,
the country will have to add 15,000 MW in five years, or 3,000 MW a
year. A common rule of thumb is that more than US$6 billion a year in
investment is needed through 1999, rising to nearly US$11 billion in the
year 2000.
Another important gap is the absence of specific legislation regarding
the concessioning of natural gas distribution to the private sector, which is
now permitted by the constitution. The lack of up to date gas regulations
and modern regulatory agencies is the chief obstacle to expansion of gas
use on the scale now being proposed. A further complication is that the
distribution of natural gas and its regulation are prerogatives of the states.
A special law is also needed to regulate private involvement in the oil
sector.
Following a long paralysis in plant construction, the power sector is
now racing against time to meet the need for increased capacity. If GDP
expands more than 6%, there could be some stress upon the transmission
lines to the states of Santa Catarina and Espirito Santo. Otherwise the
system will remain reliable because hydrological conditions continue to be
favorable.
The New Concessions Law
Law 9074, which regulates concessions, was passed in July 1995. It
is the key piece of legislation that has opened the electricity system to
competition and private capital. This in effect has shattered the state
electricity sector to an extent still not fully digested. The new law also sets
up a definition for independent energy producers, permits them to operate
and use the national grid, and allows consumers to shift from one supplier
to another.
The Regulatory Bottleneck
The absence of a comprehensive regulatory framework and tariff
guarantees is the main obstacle investors face as they evaluate involvement
in power privatization. The new legislation spelling out privatization and
concession rules is still fragmentary, and even contradictory in many
aspects. It lacks sufficient guarantees of capital return for private investors.
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The law requires that all public service concessions or permissions be
submitted to public bidding. Concessions must be formalized by a contract
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Tariff Worries
specifying both the tariff that won the bidding proceedings and the
mechanism for revision of tariffs when necessary. All assets must revert to
the state at the end of the concession period, but with due indemnization
to the concessionaire for assets not fully amortized.
Law 9074 was a setback for energy self producers, because it requires
them to submit their own projects to public bidding, thus forcing
them to offer a premium to win the bid. Moreover, the law may prove
unconstitutional on a particular point that benefits self-producers — that
of allowing land appropriation for projects not destined for public service.
If this turns out to be the case, self-producers will face another degree of
uncertainty that will further hamper their projects.
There is great concern that the new tariff legislation could be aborted in
the future by one of the economic stabilization packages that have become
regular instruments of Brazilian economic policy. Typically, these packages
suspend legal contracts for lengthy periods. They are considered by the
courts to be legitimate government acts, taken in the national interest.
The most recent stabilization package is the Real Plan, launched in March
1994. The plan gave the finance minister exclusive power to determine
tariffs, which were then kept frozen for more than a year, despite 2% 3%
monthly inflation.
Tariff-Setting Rules
An additional source of concern is the absence of comprehensive
legislation concerning charges for independent producers’ use of
transmission lines.
A new tariffs law gives each concessionaire the responsibility for
calculating its tariff, according to an established formula, and a mechanism
for periodic revision. The parameters were determined after a national
independent costs audit. Concessionaires must specify their tariffs in the
concession contract.
The Thermoelectric Option
Brazil’s energy system depends heavily on hydroelectric energy and on
oil derivatives, with negligible use of natural gas (currently 1.9%) and
coal (3.6%). National energy secretary Peter Greiner has recommended
increasing the use of gas and coal in order to make the system more
diverse.
Applications for tariff readjustment can be filed at any time, depending
on changes in costs. The tariff-setting formula must be revised every three
years, and can be revised earlier if there are exceptional grounds.
However, efforts to increase production of thermoelectricity are
hampered by longstanding preferences for hydroelectricity. Presently, an
additional 14,600 MW of untapped firm hydroelectric capacity is available
at less than US$40/MWh, including long distance transmission costs.
Energy could be imported from the Amazon basin (transmission costs
Energy supply contracts between companies must be approved by
DNAEE. Concessionaires of public services are required to create a
consumers council made up of representatives of all types of consumers.
The council will monitor and evaluate tariffs and quality of service.
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from the Amazon basin would add only US$16 to the MWh cost), and
Eletrobras has concluded that total hydroelectricity costs are competitive
with thermoelectricity. Despite these calculations, which manifest the
power sector technocracy’s preference for hydroelectricity, the Southeast
will need supplementary thermoelectric energy at some point in the future.
shipping facilities that routinely carry iron ore for export. This corridor can
handle 6 million tons of coal a year.
In the South, Eletrobras has signed a protocol with coal producers for
a set of nine power plants, to ensure supply at prices compatible with the
marginal cost of the electric sector expansion plan. The low quality coal
is feasible for use in fluidized cold bed plants. The nine units were chosen
among several already on the drawing board, totalling 4,630 MW capacity.
Gas For Sao Paulo
In Sao Paulo, gas from the proposed Bolivia Brazil pipeline could be used
to generate electricity. However, several unsolved differences block the
launch of the pipeline project and the general expansion of gas usage. For
example, Sao Paulo state utility Cesp is against the proposal put forth by
Enron to establish a 1,600 MW thermoplant that would be the anchor for
a gas-powered system. Another complication is the Brazilian authorities’
desire for the final price of gas to be the same at all city gates along the
pipeline to Rio Grande do Sul. But an equalized gas tariff on the Sao Paulo
Rio Grande do Sul section of the pipeline doesn’t make economic sense
at this stage. However, Bolivian gas will almost surely be used in Mato
Grosso.
Gas For The Amazon Basin
Coal For Minas Gerais And The South
Feeling pressure from higher tariffs and alarmed by the prospects of an energy
shortage, large energy consumers and energy intensive industries are turning to
strategies of energy self sufficiency. Mining companies, such as Samarco, plan
to get most of their energy from self production by the year 2000.
In the Amazon basin, there is room for many small thermoelectric plants
to be fuelled by the Urucu gas reserves, especially if the plants are not
located along the route of the proposed Tucurui Santarem transmission
line. Plans for the Urucu and Jurua gas reserves involve liquefying the
gas at minus 162 C at the town of Coari, close to Urucu, and then
transporting it by cryogenic ships to Manaus and Porto Velho. The
estimated cost is US$1.80/BTU.
Independent And Self Production
Minas Gerais utility CEMIG has signed an agreement with Southern
Electric to study construction of one or more thermoelectric plants fed by
imported coal. They would total about 2,200 MW and be located along
the Belo Horizonte Vitoria railway. The key to the project is to use the
return idle capacity of the iron ore export corridor, meaning the trains and
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Even second rate hydroelectric sources — of which many are still
available in the Southeast — can provide electricity for self supply at
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Executive Summary
a competitive price. Self producers have the advantage of not needing
government tariff guarantees.
Numerous medium sized sources of hydroelectricity are located in the
state of Minas Gerais, close to the big mining companies and steel mills,
and thus offer the perfect combination for self production projects.
CEMIG is far ahead of other state companies in financial reorganization,
promoting joint ventures with the private sector and negotiating adequate
arrangements for the use of its transmission grid by self producers or
independent producers.
To date, DNAEE has received 97 applications for concessions for self
production of energy, totalling 6,165 MW of installed capacity. The
applications were filed before the new concessions legislation was passed.
Therefore it is unclear if these applications have to comply with the new
legislation requiring them to submit to a public bidding process. Most
concessions range from 50 MW to 120 MW, but several are on a much
larger scale. Nearly half of them — 42 concessions — are located in Minas
Gerais. Mato Grosso comes in second with 13 concessions.
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Chapter 2
The Scope And Limits
of Brazil’s Electricity Privatization
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Bernardo Kucinski
The Scope And Limits of Brazil’s Electricity Privatization
Summary
The Broad Game Plan
The privatization of Brazil’s US$100 billion electricity industry is
irreversible, but any substantial change in the nature of industry ownership
is expected to take years. The process will take place on three levels: federal
(Eletrobras), state (with many participants), and specified individual
plants, all with varying mechanisms. Most of the game will be played only
by very big operators. Still, there are opportunities of every possible size.
The privatization of the electricity sector is part of the federal
government’s general move to restructure itself, transferring productive
activities to the private sector to reduce indebtedness and improve
efficiency. The drive to privatize the electricity sector began when lower
levels of the state apparatus began to have to cope with very urgent needs,
such as completion of paralyzed power plants.
The bulk of the federal utilities will be privatized only after a radical
reorganization and regrouping by area of activity and by river basins. The
federal reorganization also depends on the state of Sao Paulo following the
same process. Political resistance is subsiding on the left, but is tending to
increase among governors of Northeastern states, who control their states’
electricity sector machinery.
The privatization process is divided into three tiers. At the top is the
privatization of the large federal utilities that are under the control of
government holding company Eletrobras. This level is only for very strong
players.
The second tier belongs to the state utilities. Two states are following
the federal plan of privatizing utilities that are under their control:
Rio de Janeiro announced it will privatize its state electricity company
(Companhia de Eletricidade do Rio de Janeiro, or CERJ), and Sao Paulo
will privatize most of the generation and distribution sections of its three
utilities — CESP, Eletropaulo and CPFL — after splitting and regrouping
them. The restructuring of the three Sao Paulo utilities is considered a
precondition for the restructuring of the federal system. By contrast, the
state of Minas Gerais will keep control of its utility, Cemig, but it has
pioneered the sale of power plant concessions to joint ventures with private
consortia. Concessions will also be a game for very big players.
A core of strong and well managed state government utilities, such as
Cemig of Minas Gerais and Copel of Parana, will resist privatization. The
gigantic and badly managed Sao Paulo state utilities Cesp, CPFL and
Eletropaulo have no alternative but privatization.
The lack of regulatory structure and tariff guarantees are the chief
obstacles to a more rapid privatization process. But private groups are
taking risks, assuming that regulation and guarantees will be strengthened
along the way. The legal environment is considered transitional. The final
model will probably be one of mixed ownership, and the well-entrenched
electricity technocracy at the state level will likely prevail in conflicts of
interests for a long time to come.
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At the third and lowest level, there are many privatization proposals
with limited scope that are less risky and only indirectly dependent on
the reshaping of the power system. Among them are privatization of
specific power plants of all possible sizes, small, medium and very large,
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some of them half built, others still on the drawing board. Nine half built
plants belonging to state utilities and to Eletrobras subsidiaries are on
offer as partnerships with private consortia. These range from the 1,814
MW Porto Primavera, a CESP concession, to the 45 MW Cubatao, a
Celesc concession. (See Chapter IX, “Self Production and Independent
Production: A Summary of Recent and Upcoming Projects.”) Seventy-two
concessions are set for public auction under the new concessions law that
allows private groups to bid. There will be about five auctions per year,
beginning in 1995. (See Annex II.)
entire government steel sector, the fertilizer sector, petrochemicals, aircraft
manufacturer Embraer, and Escelsa (the state run distribution company in
Espirito Santo), the only electricity utility privatized so far.
In February 1995, President Fernando Henrique Cardoso proposed
that all public services be included in the privatization process. Congress
approved the proposal as Law 8978, which regulates private participation
in public services. Espirito Santo distributor Escelsa and Rio de Janeiro
distributor Light were designated for privatization. Subsequently, President
Cardoso included the four major Eletrobras power generation subsidiaries
in the national privatization program: Furnas, Chesf, Eletronorte and
Eletrosul. There are now 25 companies being evaluated for privatization,
including Light and the four Eletrobras subsidiaries.
Historical Background
During the 1960s and 1970s, more than 200 federal and state companies
were created in Brazil to promote economic development. Among them
were the giant federal holding companies Eletrobras (electricity), Petrobras
(oil) and Telebras (telecommunications). In 1973, congress passed Law
5899, which granted Eletrobras regulatory and planning authority. Law
5899 also set quotas for how much electricity utilities were required to
buy from the Itaipu Binational facility (co-owned with Paraguay), through
Furnas, the Eletrobras subsidiary that operates Itaipu.
The 1970s Tariff Meltdown
The key factor in the decline of the government run electricity sector
— despite a tradition of technical quality — was the decision taken in
the 1970s to hold down tariffs. Until the 1960s, tariffs were based on a
basket of values that included the prices of gold, the US dollar and oil.
Then, after a period during which tariffs were based on producer costs, the
government introduced a national equalized tariff, taking the large profits
from the low cost utilities and transferring them, through a compensation
account, to the higher cost utilities. But when the government decided to
fight inflation by holding down the national equalized tariff, the utilities
became insolvent. In 1993 the national equalized tariff was abolished, and
an estimated US$24 billion was injected into the utilities by settling the
compensation account.
In early 1990, congress passed President Fernando Collor de Mello’s
national privatization program, which became Law 8031. The law
designates the National Bank for Economic and Social Development
(BNDES) both to run the privatization process and to manage the
country’s privatization fund, in which shares of the state companies to
be privatized were deposited. By September 1995, 37 companies had
been privatized under the national privatization program, including the
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Long-Term Planning
installed). Total need would be 15,000 MW in five years, or 3,000 MW a
year.
During Brazil’s long period of economic stagnation, from 1981 to
1991, capital investment plummeted from 25% of GDP to 14% of GDP.
Investments in power plants were virtually halted. In 1986, Eletrobras
unveiled its long term Plan 2010, in an attempt to plan investment until
that year. Forecasts called for demand to grow from 175.7 TWh, in 1986,
to 668.8 TWh in 2010: a 5.7% compounded annual rate of growth.
Installed capacity would have to grow from 42,700 MW, in 1986, to
160,000 MW by 2010. The plan also forecast more energy transport
between the North and the Southeast. Electricity shortages were only
avoided because the stagnation in investment was matched by stagnation
in economic activity.
In 1995 the Cardoso administration introduced laws that specifically
regulate private sector participation in the electricity sector. (See
Chapter III, “The Legal Framework for Electricity Sector Privatization.”)
Simultaneously, President Cardoso won congressional approval to revise
the 1988 constitution to eliminate rules that accorded preferential
treatment to domestic capital.
Rules For Transmission
Also in 1995 the National System for Transmission of Electrical Energy,
or Sintrel, began to be conceived. In August, the principal regulatory
agency for electricity, the Departamento Nacional de Aguas e Energia
Eletrica (DNAEE), completed its first draft of a method to set Sintrel’s
tariffs. The proposal calls for transmission tariffs to vary according to
distance, duration of the contracts and average duration of the concession.
Values being mentioned vary from US$1.1 per MWh to as much as
US$12 per MWh. In the Serra da Mesa contract with the private sector,
transmission costs will vary from US$1.1 to US$5.48 per MWh.
The 1993 Recovery
When economic recovery began in 1993 and GDP resumed an average
annual growth rate of 4% 5%, Eletrobras once again turned its attention
to the urgent need to expand the power supply. Plan 2010 was revised to
Plan 2015. This was also revised in 1995. (Within the 20 year plan is a 10year plan that was also revised in 1995). Scenario III in Plan 2015 is now
considered the most probable. (See Chapter IV, “The Electricity Market
and Eletrobras’ Plan 2015.”)
Financial Gap
Scenario III predicts that GDP will grow by an average of 5.2% p.a., and
that Brazil will need 560 TWh by the year 2000, rising to 730 TWh by the
year 2015. Installed capacity would have to reach 74,000 MW by the year
2000, compared to 58,686 MW in 1995 (including turbines still being
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The rise in tariffs permitted in 1993 will add an estimated US$800
million to utilities’ revenue, but the amount is still considered insufficient
to finance development. The government hopes to attract some US$2
billion in private capital per year, out of the total US$7-9 billion a year
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The Shape Of Eletrobras’ Privatization
needed for the plan’s first phase and the US$11 billion a year needed
beginning in the year 2000. The state power companies, burdened by
heavy debt, have only about half the funds they need to stay on schedule.
To allow competition into the generation business and at the same time
assure the neutrality of the transmission grid, Eletrobras plans to split
its subsidiaries into separate units dedicated to generation, transmission
and distribution. The government wants to privatize generation and final
distribution, possibly in smaller units to keep any one generator from
dominating a wide region, and also to facilitate a sell off. Some of the assets
are too large to allow for a smooth sale.
Goals of the Ten Year Plan
The latest revision of Eletrobras’ Ten Year Development Plan, unveiled
in July 1995, is based on Scenario III of Plan 2015, predicting average
annual GDP growth of 5.2% and calling for more than US$23 billion in
investments during the first four years alone, as follows:
Rules for Transmission
INVESTMENT REQUIREMENTS, 1995-1998
The units dedicated to transmission will then be regrouped into a
national system under the control of a branch of Eletrobras. The system
will treat all generators equally, charging a tariff for energy transportation
and eventually an administrative fee. Large scale consumers will be in
position to sign long term contracts with suppliers offering the lowest
tariff. An additional spot market will take care of fluctuations on both
demand and supply needs. Though the market plan seems adequate, there
are still many reservations concerning its actual operation, and many
technical difficulties to be overcome.
(US$ billions)
1995
1996
1997
1998
Power production
1,9402,7133,2143,390
Transmission
1,4722,0271,7661,664
Distribution824
1,119
1,044
1,106
General Installations
270374384505
Total4,506
6,233
6,408
6,665
Progress To Date: The Escelsa Sale
Source: Eletrobras
Espirito Santo state utility Escelsa was the first state utility to be sold.
It went on the block in July 1995 and was bought by a consortium of 11
large pension funds and the IVEN group, whose main partners are the
By 1999, US$10.4 billion total investments will be needed, rising to an
average of US$11 billion a year during the following three years.
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Privatization Bottlenecks
Brazilian banks Pactual, Nacional and Bozano. They outbid the equally
strong Power consortium led by Chase Manhattan Bank. The final price
paid for the controlling share of the company’s stock was US$370 million,
which was 11.8% over the minimum price.
Because it will promote competition among power generators, the
Sintrel transmission system is being resisted by large, inefficient utilities,
particularly CESP and Itaipu. There is also a fundamental contradiction
between the compulsory purchase quotas for costly Itaipu energy, under
Law 5899, enacted in 1973, and the Sintrel. Private companies will be
reluctant to invest in independent production if the rules of access to
Sintrel, including tariffs, are not clearly defined and guaranteed by law. The
Itaipu purchase quota does not apply significantly to self production.
The next federal utility to be privatized is Rio de Janeiro’s Light Servicos
de Eletricidade, which is 10 times larger than Escelsa. Light’s assets and
structure are undergoing evaluation. Privatization is still scheduled for
1995. However, there are doubts that a privatization of this size and
complexity can be achieved this year. (See Chapter X, “A Profile of the
Major Electric Utilities.”)
The other main obstacle to full scale privatization of the federal system
is the lack of a wider and clearer regulatory framework. State authorities
are concerned that there is no broad system of laws defining private
companies’ responsibilities toward the environment and addressing how
public services are to be provided in complex situations, such as when a
hydroelectric company has to provide both water supply and navigability,
which is often the case. Private companies also fear that the government
will not stay firmly behind the program and that the tariff system will
wobble. (See Chapter VI, “Modernizing the Regulatory Structure.”) In
practice, the private sector is entering the process on a case by case basis
and hoping that as the sector becomes increasingly privatized, it will gain
strength to resist politically motivated efforts to manage its affairs.
Selling Off Eletrobras
The four main Eletrobras subsidiaries to be privatized are gigantic
companies with close to US$50 billion in total assets. In contrast to
distributors Light and Escelsa, they are also active in power generation
and long distance transmission. Eletronorte has US$16 billion in assets,
Chesf has more than $14 billion, Furnas has $13 billion and Eletrosul
has $6 billion. However, the valuations may completely change after
the government splits the power generation activities from distribution
and long distance transmission. The four giants were already nominally
included by presidential decree in the national privatization program, but
it is estimated that auctions will not start before a year’s time and that the
whole process will take three years to complete.
Privatization Of State Utilities
According to preliminary plans, the nuclear facilities and the Itaipu
partnership, established by international agreement with Paraguay, will
remain under Eletrobras authority.
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The three largest industrial states — Sao Paulo, Minas Gerais and Rio
de Janeiro — have electricity privatization plans similar to that which the
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federal government is considering for Eletrobras. Sao Paulo’s utilities play
such a key role in the national system that their privatization is considered
a prerequisite for the privatization of Eletrobras subsidiaries. All three
states are heavily in debt and need to privatize a substantial part of their
electricity sectors to be able to invest in other kinds of development
projects.
billion in costs to CESP. The costs are due to corruption, overbilling and
construction delays. Indications from the market are that Zylbersztajn’s
US$3.5 billion estimate is too high.
The government is committed to absorbing the difference, possibly by
paying CESP with long term state bonds. The state would then hand over
the plant to Banespa at market value, and Banespa would privatize it. Porto
Primavera needs another US$1.8 billion to be completed. It has 1,800
MW installed capacity and could begin operations at the end of 1988. The
Canoas complex is worth US$300 million to $400 million, and will be
transferred directly to Banespa.
For example, Sao Paulo state’s liabilities shot up from US$37 billion in
December 1994 to US$48 billion in August 1995, of which US$14.5
billion was pure financial debt. With public servants’ salaries consuming
up to 80% of the state budget, there is no way out of the crisis but to sell
state property. Most state governments’ finances are afflicted with the same
types of problems.
Far more broad and complex is the Sao Paulo state government’s second
scheme: a restructuring of the electricity sector, under which most of
the state power companies, including CESP, would be privatized. Under
this plan, the three Sao Paulo state holdings, (Eletropaulo, CESP and
CPFL), with US$16 billion in total assets and an estimated US$12 billion
in long term debt, would be “decontaminated” of their liabilities, such
as overstaffing and overindebtedness, and split in into six generating
companies, 13 distribution companies and one unified transmission
company. Transmission would remain under state control. The smaller
generation and distribution companies would theoretically have clearer
operational and geographic identities and would also, in principle, be
subject to privatization.
Privatization of state utilities was also motivated by the federal
government’s January 1995 ultimatum for 18 state concessionaires to
repay an estimated US$1.75 billion in debts incurred to Eletrobras or face
nonrenewal of their concessions. Most of the debts stem from nonpayment
for federally generated energy in 1993.
Sao Paulo’s Plan
Sao Paulo is developing two separate privatization schemes. The first
is the straightforward sale of a stake in CESP’s Canoas I II and Porto
Primavera hydroelectric facilities, to pay part of the state debt to stateowned bank Banespa. The plants may even be sold outright to Banespa.
However, the plan has problems stemming from the difference between
Porto Primavera’s value, estimated at US$3.5 billion by state energy
secretary David Zylbersztajn, and the plant’s accumulated US$5.9
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The plan also calls for a state holding company to be created to
administer state participation in the various companies, as well as to
coordinate overall state participation in the electricity sector. The newly
privatized companies will issue “golden shares” to be held by the state
holding company. The golden share in effect grants the state veto power
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Minas Gerais
that would enable it to ensure satisfactory public service and compliance
with regulations concerning public land use. In addition, the state energy
regulatory agency would be upgraded.
The restructuring privatization will take at least two years. First, the plan
must be submitted to the state assembly, which is still expected to happen
in 1995. Then there must be considerable internal reorganization. By early
September 1995, there was already significant progress in trimming the
employment rolls: of the 52,236 jobs in the state power sector (including
state gas company Comgas, also subject to reorganization), 8,420 had been
cut. Nearly 400 administrative functions were eliminated. Governor Mario
Covas nominated a team of very young administrators to carry out the
changes under the direction of energy secretary David Zilbersztajn, who
also happens to be President Fernando Henrique Cardoso’s son in law.
The state of Minas Gerais is in a privileged position, with a booming
economy and only US$5.4 billion in debts. Its utility, Cemig, is one of the
country’s best administered companies. Cemig has longstanding links with
the private sector, and is already seeking private partnerships to develop
hydro and thermoelectric facilities, to get help for the large investments
needed and to improve efficiency. The state is going through a period of
modernization and is developing close ties with multilateral development
agencies. Though there are no plans for the outright privatization of
Cemig, Minas Gerais governor Eduardo Azeredo has asked the state
assembly’s permission to sell 31% of the company’s voting stock. Since the
state has 84.25% of the voting stock, it will keep control of the company.
Rio de Janeiro
Privatization Of Individual Plants
Privatization has become the core of Rio de Janeiro governor Marcelo
Alencar’s strategy for the state. He is sending a proposal to the state
assembly for privatization of most public services and the sale of state
owned stock in most companies. He hopes to make more than US$2
billion by privatizing all large state enterprises (including the utilities),
selling the state’s controlling stock in Banerj as well as the petrochemical
pole, the public transport system and other public services.
Partial privatization through partnerships or leasing contracts is an
emergency solution devised to facilitate the completion of paralyzed
plants before the electricity sector’s new format is designed and agreed
upon. About US$4.2 billion in private capital is needed immediately to
complete the plants already started, not including Serra da Mesa, Igarapava
and Ita, which are already in the hands of private consortia. The most
important plants to be privatized under the partnerships/leasing plan are:
thermoelectrics J. Lacerda IV, Jacui and Candiota III and the hydroelectric
Cubatao, all in the South; hydroelectrics Porto Primavera, Canoas I
and II, and Miranda in the Southeast; thermoelectric Corumba I in the
Central West region; hydroelectric Manso and thermoelectric Maua, both
Plans call for auctions to start this year. First will be state electricity
company CERJ, in a straightforward sale of the state’s 70% stake. State gas
company Companhia Estadual de Gas (CEG) will also be offered to the
private sector.
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in the North. (See the complete list in Chapter IX, “Self Production and
Independent Production.”)
Many other projects can be developed under the partnership/leasing
scheme. Cesp, for example, has given up a series of very small hydroelectric
projects that could easily be taken over by private companies. DNAEE is
already facilitating private partnerships in concessions for plants that are
halfway to completion by extending the concession periods.
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Chapter 3
The Legal Framework
for Electricity Sector Privatization
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The Legal Framework for Electricity Sector Privatization
Summary
Overall planning was handled by the Electric System Coordination Group
(GCSE), formed in 1982 by 11 major state concessionaires and Eletrobras
subsidiaries. Tariff policies were decided by the finance minister, who
still has the last word on tariff readjustments. Until recently, DNAEE
automatically granted concession applications from state power companies
and Eletrobras subsidiaries.
Legislation affecting privatization is still fragmentary, and in many
aspects contradictory. Capital return guarantees for private investors
are insufficient. Specific legislation has not yet been enacted for gas
distribution concessions to the private sector. Laws are also needed to
regulate private sector activity in the oil industry.
The new legislation responds to two needs. One is to devise regulations
for Article 175 of the 1988 constitution, which requires public bidding
for all public service concessions. The other is to adapt legal and regulatory
activities to the partial privatization of the power sector. While the exact
nature of the new legislation will depend on the balance of power among
the various interest groups, the main technical and operational principles
were already outlined during planning sessions held by top power officials
in the mid 1980s, as it became evident that the system was nearing
collapse.
During the next two years, congress is expected to pass additional
legislation to fill the gaps and clarify contradictions. In the meantime,
companies are operating under the belief that the authorities are acting in
good faith, that they simply lack the time to create a comprehensive legal
framework prior to the start of the privatization process, and that the only
way to proceed is to take some risks. By being participants in the system,
they hope to be in a position to help improve the legislative framework.
Political And Historical Background
Building On Earlier Studies
Brazil’s electricity legislation stems from the 1934 waters code, which
holds that all rivers and bodies of water belong to the federal government
and which gives priority to public use. The federal government has
exclusive authority to grant concessions, through the Departamento
Nacional de Aguas e Energia Eletrica (Department of Water and Electrical
Energy, or DNAEE), the principal regulatory agency for electricity (see
Chapter VI, “Modernizing the Regulatory Structure”).
In 1987, 300 experts met for several months under the REVISE project
(Revisao do Sistema Eletrico) to conduct an in-depth study. Many of the
officials now overseeing sector wide changes were REVISE participants.
REVISE’s final report admitted that the electricity sector was in chaos, but
was still inconclusive because government companies still did not support
wide ranging privatization. A committee set up by the Mining and Energy
Ministry (MME) to review the energy system later submitted a report that
was approved by President Fernando Collor de Mello in November 1991.
This report recommended opening the power sector to private initiative,
During the period of intense statism of the 1960s and 1970s, substantial
planning and regulatory powers were transferred to the large government
power companies, especially the federal holding company Eletrobras.
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setting realistic tariffs, and stimulating self production and independent
production of energy. The report said that in addition to financial and
economic problems, the electricity sector had institutional problems liable
to jeopardize supply over the long term. Most of the changes now being
proposed closely follow the MME committee’s recommendations.
foreign companies, and therefore fully opens the mining and electricity
sectors to foreign capital. The other permits private companies to enter the
gas distribution business.
Another amendment expected to be passed imminently would
allow private sector participation in the oil and telecommunications
industries, though the exact wording and scope are still open to debate.
The telecommunications legislation is relevant to the electricity sector
because the fast growing cable TV market uses the electricity distribution
network to set up cable systems, thus adding value to the electricity sector’s
distribution grid.
Meanwhile, the 1988 constitution had given congress unprecedented
powers and the ultimate say on fundamental legal and policy matters (in
general, not only in matters pertaining to electricity). Greatly influenced
by unions, it was drafted in a spirit of mild nationalism and the restoration
of citizens’ rights after a long period of military rule. Subsequently, the
country’s nationalistic bent changed to a policy of open doors to foreign
capital. Both President Fernando Collor de Mello, impeached in 1992, and
his successor, President Fernando Henrique Cardoso, were elected under
the banner of eliminating constitutional restrictions to foreign capital and
reducing government intervention in the economy.
Legislative Scorecard
What follows is a rundown of electricity related legislation as of
September 15, 1995. All articles mentioned are part of the 1988
constitution.
Revising The Constitution
1)Under Articles 21 and 176, all potential sources of hydroelectricity
and mineral resources belong to the nation and are considered distinct
from land properties. Hydroelectric and mineral resources are eligible
for concessions or permits, except for those up to 10 MW. (A permit,
sometimes called an authorization, is an administrative action revocable
at any time. A concession is a legal contract with all clauses and terms
defined.) Only the government may grant concessions for exploitation of
hydroelectric resources, set up national management systems, define criteria
for granting concessions, pass water and energy related legislation, and
appropriate property. However, landowners are assured a share in the profits
from the exploitation of mineral resources;
Though the proposed constitutional amendments and related regulations
covering the electricity sector are supported by a comfortable congressional
majority, the process is a slow one. Each proposed amendment needs two
separate votes in both houses. Some representatives have placed conditions
on the proposals in order to preserve the assets and market interests of such
major government companies as Eletrobras, Telebras and Petrobras, though
still allowing for some degree of competition.
Two important constitutional amendments affecting the electricity sector
have already been passed. One extends equal treatment to domestic and
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generating electric power for their own use. Decree 915 is so far the only
legislation that specifically targets self producers. Its main points are:
2)According to Article 23, registration and regulation of hydroelectric
resources, as well as environmental protection, are a joint responsibility of
the federal government, the states and the municipalities;
• The consortium must register with DNAEE. Its activities and duration
are restricted to the generation of energy under the specific concession or
authorization granted;
3)Articles 46 and 48 delegate to congress the power to define priorities and
incentives for exploitation of hydroelectric resources in order to set regional
development policies. The articles also authorize congress to exploit
hydroelectric resources in indian preserves;
• Participants must share the energy produced in proportion to their stakes
in the consortium. Excess energy may either be negotiated among the
participants or sold to public service concessionaires, but it may not be
offered directly to the public, even free of charge;
4)Article 175 establishes the current process of redefinition of the legal
framework for the electricity sector. It requires that all concessions or
permits for public services be awarded through public bidding. Before
Article 175 was enacted, companies would simply request DNAEE’s
permission to conduct a feasibility study and later apply for and get the
concession to set up the plant and run the service. Now, even self producers
will have to submit projects they have developed to a public bidding
process and risk losing it to another party.
• Consortia may be formed to exploit a specific concession. Members may
be either various public service concessionaires or a combination of public
service concessionaires and private groups. In the second case, the public
service concessionaire must control the consortium. The concession may
not be extended past the original term granted, and the federal government
is entitled to ask for possession (reversao) of the assets at the end of the
concession;
• The consortium is permitted to use transmission lines belonging to state
companies, with proper payment.
Tariff Breakthrough
In March 1993, congress passed Law 8631, which abolished the national
equalized tariffs and introduced cost related tariffs. The law also allowed for
an immediate rise in tariffs, then at a historical low. Detailed regulations
on how to define cost related tariffs were issued at the same time, in Decree
774 (see Chapter VII, “How the Tariff System Is Structured.”)
Bringing Paralyzed Plants Back To Life
Decree 915 was designed specifically to allow private groups to revive
some of the hydroelectric plants whose construction was paralyzed when
the concessionaires (state power companies) turned out to lack the
financing to complete them. The state companies resisted the measure
and demanded an additional provision giving them veto power over a
consortium’s application to DNAEE. However, the provision was overruled
by the federal government.
Private Producers Authorized
In September 1993, then-President Itamar Franco issued Decree 915,
which authorized formation of consortia by companies interested in
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Thus far, three paralyzed power projects have been taken over by
consortia under Decree 915. But there are still doubts as to whether the
action was legal, because Article 175 of the constitution requires a public
bidding process. The original concessions were granted well before the new
constitution was passed, but their transfer took place afterwards. Five other
half completed projects are on offer. (See Chapter IX, “Self Production and
Independent Production.”)
service is provided free of charge — the premium to be paid to the granting
authority. A combination of the two criteria may be applied as well.
At the same time the concessions law was passed, President Fernando
Henrique Cardoso issued a presidential decree canceling 33 power plant
concessions, of which 29 were overdue and four were paralyzed, as well
as all concessions granted to Itaipu at the Tocantins River, downstream
to the Serra da Mesa hydroelectric plant. Most canceled concessions were
either small projects or only preliminary studies. The state concessionaires
resisted giving up their major concessions, and during the bargaining were
granted 20 year extensions, which will give them the power to negotiate
associations with private consortia. But the state concessionaires were
also given an ultimatum to resume work on paralyzed plants or offer an
alternative solution, such as a package including a consortium of private
companies. If they do not comply, their concessions will be canceled.
Key Features of the Concessions Law
In February 1995, congress passed the major piece of legislation allowing
private participation in public services: the Lei das Concessoes, or
Concessions Law 8987, which regulates Article 175. The law is a so called
“Lei Quadro,” or framework law, laying out the principles governing public
services concessions, regardless of the nature of the service or its sphere
(national, state or municipal). It sets forth the concessionaire’s rights and
obligations, the general procedures for granting and regulating concessions,
and the items that must be included in the concession contract. It reiterates
that all public service concessions or permits must be submitted to public
bidding, that the concessions must be formalized by a contract specifying
the winning tariff, and that tariffs are subject to revision whenever it is
necessary to maintain the concession’s financial economic equilibrium. The
law makes mandatory the return of all reversible assets to the government
at the end of the concession term, but with due indemnization to the
concessionaire for assets not fully amortized.
Concessions Regulations Passed
In July 1995, congress passed Law 9074, which specifically regulates
electricity sector concessions. Law 9074 is today the principal law
governing the electricity sector. It shattered the sector to an extent still not
fully digested. The law’s main aims were to introduce competition into the
system and at the same time stimulate immediate expansion by means of
private capital. It accomplished its goals by defining independent energy
producers, opening space for them to operate and to use the national grid,
and allowing consumers to shift from one supplier to another.
The main points of Law 9074 are:
The main criteria for granting public service concessions will be either
the tariff to be charged or — in the case of radio concessions, in which the
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•All hydroelectric projects above 1 MW for public service or above 10 MW
for self production must be granted through public bidding;
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suggests that realistic tariffs are still not fully guaranteed. The article says
that concessionaires can offer future revenue as a guarantee for financing,
but not if governmental financing institutions are involved, in which case
additional guarantees are required. (See Chapter VII, “How the Tariff
System Is Structured.”) Both self producers and independent producers
claim that the article limits their capacity to raise financing, in addition to
creating suspicion regarding tariffs.
•Concessions for thermoelectric plants above 5 MW must be submitted for
public bidding; for self producers the limit is 10 MW;
•The government may charge for the granting of the concession;
•Large consumers of energy (above 10 MW and 69 KV) are allowed to shift
suppliers. After three years, the limit is lowered to 3MW, 69 KV; it may be
further reduced after eight years. Consumers denied supply by their regular
suppliers may shift suppliers as well.
Self producers are still hoping to get improved treatment. They will
probably press for higher limits on concessions, say to 50 MW or 100
MW, before they must be submitted to public bidding. DNAEE has
received 66 applications for authorizations to run self producing units,
totalling 4,700 MW and US$4.5 billion in investments. Most range from
50 MW to 100 MW.
Companies claim that the national grid system (Sintrel) is late in defining
a pricing policy for the grid’s use. Meanwhile, Sintrel is still in the making,
because a few major concessionaires still have not joined, thus delaying
the establishment of a pricing policy. Preliminary information indicates
that the energy transportation price will vary from R$1.25 to R$5.48 per
MWh, depending on distance, frequency and period of usage.
Constitutional Challenge
Setback For Self Producers
Law 9074 may be unconstitutional on several grounds:
Law 9074 came as a defeat for self producers of energy on two main
points: 1) requiring them to submit their own projects to a public bidding
process; and 2) the lack of definition in case of rationing of energy. The
bidding requirement will force them to disclose feasibility studies to
potential competitors. The actual process will force them to pay for the
concession, raising the cost of energy, as compared to the present situation
in which they use the natural resource without paying any royalties. In
the event energy rationing, it is not clear whether they will be obliged to
participate in the rationing.
•It allows concessions to be transferred to private initiative along with
transfer of the controlling stock — in the case of privatizations, for
example. Legal experts say that prior to any stock transfer, there must be
public bidding for the concession itself;
•It allows self producers to request appropriation of land (Article 10). Experts
say land may be appropriated only for public service purposes, which
does not include self production. Landowners are allowed to mount court
challenges to appropriations’ claims;
•It does not define criteria — or circumstances — for which types of
hydroelectric projects should be destined for public use or private use (self
production);
Would be independent producers claim that Article 28 of the law
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Law 8987, February 13, 1995: Public Service Concessions
•It requires each new section of a transmission grid to be allocated through a
public bidding process, which defies the integrated nature of transmission
grids.
Law 9074, July 7, 1995: Power Sector Concessions
Environmental Protection
New environmental protection guidelines were set by Eletrobras’ 1991
93 Environmental Master Plan. At the same time, a Committee for the
Coordination of Environmental Protection Activities (COMASE) was
formed by officials of DNAEE, Eletrobras and the major concessionaires
to support and revise the master plan. The new policy is to demand stricter
obedience to environmental protection requirements and to incorporate
a wider range of social and environmental concerns, including cultural
concerns. All projects are required to submit an Environmental Impact
Report (Relatorio de Impacto Ambiental, or RIMA) to state authorities as
part of the application process. Monitoring of projects during construction
has been lax and will probably be strengthened. (See Chapter VI,
“Modernizing the Regulatory Structure.”)
Summary Of Principal Electricity Related Laws
Decree 24643, July 10, 1934 Waters Code
1988 Constitution, Articles 21, 23, 46, 48, 175, 176
Law 8631, February 25, 1993: Tariffs
Decree 774, March 18, 1993: Tariffs
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Chapter 4
The Electricity Market
and Eletrobras’ Plan 2015
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The Electricity Market and Eletrobras’ Plan 2015
Summary
The Power Inventory
Under the most likely scenario spelled out in Eletrobras’ 20-year plan
(1995-2015), average yearly GDP growth will be 5.2%, and annual
electricity production will have to treble to 730 TWh by the year 2015
to keep pace with this growth. Even if economic recession were to set in,
Brazil would have to double its available electricity within the next two
decades to more than 560 TWh a year. Plan 2015 emphasizes continued
overwhelming reliance on hydroelectricity.
DNAEE’s most recent official survey of plants with capacity of more
than 10 MW was completed in February 1995. The survey revealed 104
operating hydroelectric plants, including the Itaipu Binacional facility.
Also included were 39 thermoelectric plants, plus the country’s only
operating nuclear plant, 657 MW Angra I. Under current expansion plans,
hydroelectric potential that would cost approximately US$40/MWh is
being explored. The proportion of thermoelectric power has been boosted
to 30% of the projected 18,401 MW added capacity, or 5,515 MW. (See
Chapter VIII, “The Thermoelectricity Option.”)
Southeastern Brazil, where the bulk of the country’s industry is located,
is in the most urgent need for new capacity. There is some concern that
shortages will start to show up in this area in 1997.
Brazil has 17,963 MW of firm hydroelectric capacity that could
be tapped at a cost of US$50.00/MWh. Plan 2015 suggests that
hydroelectricity remain the principal source of power until the price
reaches US$70/KWh. Thermoelectricity would be used only as a
transitional technological bridge until 2015. Total hydroelectric potential,
cost notwithstanding, is approximately 97,500 MW firm capacity, half of
which is in the Amazon, 31% in the Southeast/West Central region, 14%
in the South, and only 5% in the Northeast.
The Hydroelectricity Bias
More than 38% of the energy produced in Brazil is electricity, 93% of
which comes from hydroelectric plants. Hydroelectricity will remain the
country’s main source of energy. This was confirmed under two scenarios
outlined by a government committee set up in 1990 to review the structure
of energy production. One scenario assumed no major policy changes. The
other involved measures that would conserve energy and correct energy
price distortions. Power authorities are now tentatively pursuing the second
strategy. Under both scenarios, hydropower is to provide 32.8% of primary
energy by the year 2010. Thus, both pricing policies and expansion plans
are dominated by the economics of hydroelectricity.
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When measured by installed capacity, hydroelectricity is even more
dominant. Total installed capacity reached 58,686 MW at this writing,
including 6,300 MW produced by Brazil’s half of the Itaipu Binacional.
Only 3,245 MW of total installed capacity comes from thermoelectric
plants, and 657 MW comes from nuclear powered Angra I. Up to 99%
of installed capacity from plants over 10 MW is destined for public sector
use, while only 1% cent goes to exclusive use.
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The Electricity Markets
EXISTING CAPACITY
Brazil has three separate electricity markets: the Northwest, the Northeast
and the Southeast/Central West.
(DNAEE Concessions and Authorizations over 10 MW)
February 1995
The Northwest. The sparsely populated but fast growing Northwest
comprises the western part of northern Brazil including the states of
Amazon, Roraima, Acre and Rondonia. In this huge geographic area,
electricity consumption totals only 559 KWh/per capita, about a third
of the national average. The electricity supply system is only partially
integrated. Most systems are isolated from one another and only reach
neighboring areas.
Number ofAuthorized
PlantsCapacity (MW)
Operating hydroelectrics104*54,784
Operating thermoelectrics
393,245
Nuclear plant1657
The North’s installed capacity is 5,734 MW, including oil fueled thermal
plants. Total consumption reached 11,506 GWh in 1994, just under
5% of national consumption. The projected 230 Kv 1059 km Tucurui
Altamira Santarem transmission line that would link the Northern and
Northeastern systems will not be economically viable before the year
2000. But the gas fields of Urucu, along with the power that will be
available with the completion of Tucurui II (2,300 MW) and the Samuel
hydroelectric facility will create sufficient supply for big northern cities
until the year 2010.
Total capacity58,686
PROJECTED ADDITIONAL CAPACITY
Hydros in expansion plan
42
18,401
Thermos in expansion plan
12
5,515
Second nuclear plant11,350
Concessions granted
by DNAEE, but not
included in Eletrobras2011,893
expansion plans
(Hydros only)
In the Amazon area, there is room for many small thermoelectric plants
to be fueled by Urucu gas, especially in locations that are not along the
routes of the proposed Tucurui Santarem transmission line or any other
line proposed for the region. Eletronorte, the major state concessionaire
in the area, is already studying the possibility of building small gas fueled
thermoelectric plants along the rivers of the Amazon basin.
*Includes half of Itaipu capacity.
Source: DNAEE report on concessions, February 1995.
The Northeast System. This is an integrated system providing 36,900
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GWh of electricity in 1994, or about 15.6% of national consumption.
Installed capacity is 8,360 MW. The Northeast system is neither linked
to the major southern systems nor to the Northwest area. But it supplies
energy to the East Amazon states of Para and Tocantins, thus allying them
with the Northeast system rather than the Northern (Amazon) region.
The major sources of electricity in the Northeast are rivers that travel a
considerable distance from the south: the Sao Francisco and the Tocantins
Araguaia.
additional capacity, fueled by coal. In Sao Paulo, gas from the Bolivia
Brazil pipeline could be used to generate electricity, assuming the obstacles
to building the pipeline are overcome. Bolivian gas will almost certainly
be used in Mato Grosso. In Minas Gerais, the best technical solution
is to fuel thermoplants with imported coal. (See Chapter VIII, “The
Thermoelectricity Option.”)
The areas most vulnerable to energy shortages are the states of Espirito
Santo and Santa Catarina. Eletrobras estimates that if the economy
expands more than 6%, stress on the transmission lines to Santa Catarina
and Espirito Santo could result. Otherwise the system is expected to hold
up, because hydrological conditions have been favorable in the Southeast.
Following the construction of Xingo’s 500 MW second turbine in May
1995, and given the construction of the Serra da Mesa hydroelectric plant,
which will control the flow of the Tocantins River and increase the Tucurui
transmission line’s firm capacity limit, the Northeast will be well supplied
with electricity until the year 2000. But the region is regularly stricken
by droughts and lacks large local sources of hydroelectricity. In 1995 the
Northeast’s major reservoirs went down to some 55% of capacity. After the
turn of the century, it will make sense to build a large thermoelectric plant
in the area.
ENERGY MARKET (1994)
North Northeast Center/WSoutheast South
(GWh)11,506 36,900 10,854 141,561 34,599 235,420
Share 4.8% 15.7% 4.6% 60.1% 14.7%100.0%
The Southeast, Central West And South Systems. This is Brazil’s major
integrated system, distributing 187,014 GWh of electricity in 1994, or
79.4% of the total national supply. As of December 1994, it had 33,722
MW installed capacity. Most of Brazil’s industry is concentrated in the
Southeast, which is under considerable stress from delays in completion
of power plants. Most large scale potential in the area has already been
tapped, but there are many small and medium sized sources to be
developed in Minas Gerais.
Installed Capacity (MW)
5,734 8,360 5,80224,8518,00152,748
Source: Eletrobras
The Southeast will soon need supplementary thermoelectric energy.
In the extreme south, plans call for installation of some 4,900 MW of
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Total
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The Demand Side
for efficiency gains in energy production. These are estimated to produce
savings ranging from 63.9 TWh a year in 2015, under scenario I, to 123.7
TWh a year under scenario IV.
Brazil produced 245,593 GWh in 1994, 3.2% more than in 1993,
while total consumption reached 235,420 GWh. Available energy totalled
277,937 GWh, or 4.5% more than in 1993, due to favorable hydrological
conditions. But this comfortable margin was reduced during the first half
of 1995, when demand went up by 4.2%. Demand expansion is now led
by residential consumption, but industry still takes about half of all supply,
as is shown in the table below.
ENERGY SCENARIOS OF PLAN 2015
Total Energy Demand (TWh)
Scenario
19952000200520102015
CONSUMPTION BY SECTOR (1994)
Industry47.4%
Residential 24.8%
Commercial 12.8%
Government
11.5%
Farms3.5%
I
II
III
IV
246.2293.8384.0467.2563.0
250.9329.5340.6523.9631.3
273.7360.7473.2589.7731.4
273.7377.6495.4642.6826.4
Source: Eletrobras Plan 2015
The government originally took Scenario II as the base for its Ten Year
Development Plan (1995-2005) for the energy sector. It assumed a very
slow rate of economic recovery, with average GDP growth of 4% during
the period. But now Scenario III looks to be closer to reality and more
suitable as a tool for future planning. Energy Secretary Peter Greiner has
said he wants to use Scenario III as the base for the power sector. The
parameters are as follows:
Source: Eletrobras
Eletrobras’ Scenarios
All four scenarios of Plan 2015 call attention to Brazil’s need to
substantially increase generating capacity during the next 20 years. Average
GDP growth predictions range from 3.3% a year (Scenario I) to 5.8%
(Scenario IV). Electricity demand would vary from 563.0 TWh a year
by the year 2015, under Scenario I, to as much as 826.4 TWh a year
under Scenario IV. The figures include self supply. The projections allow
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Scenario III calls for additional capacity of 26,400 MW installed between
1995 and 2002, of which 12,000 MW are power plants already underway.
Investments needed are on the order of US$7-9 billion a year between
1995 and 1998, rising to an average of US$11 billion a year afterwards.
Scenario III
GDP (By 2015)
US$ 1.124.5 billion
Per capita GDP
US$ 5,390.0
Per capita consumption
KWh/year 3,270.00
Number of consumers
59.9 million
Electricity demand by 2015 731.4 TWh
Residential26.8%
Commercial12.1%
Industrial47.8%
0ther13.3%
Year
19951996199719981999200020012002
Capacity (MW
64.265.967.472.377.181.085.2
90.6)
Investments (US$ bn)
7.66.69.09.610.4
11.211.7
12.5
Regional participation (consumption)
Source: Eletrobras
North8.6%
Northeast21.6%
Southeast48.2%
South15.6%
Central/West6.6%
GDP growth rate/year
5.20%
Electricity demand rate of growth/year
5.10%
Elasticity GDP/Electricity demand 0.98
Electric intensity (KWh/US$)
0.65
Will There Be A Shortage?
There is considerable debate over whether Brazil will face an energy
shortage in the next few years. Despite the extraordinary increases in
demand during the first year of the Real stabilization plan, hydrological
conditions were favorable and there were no energy shortages. But the
medium term presents an uncertain picture. If GDP expands more than
6% p.a., there could be stress upon the transmission lines to the states of
Santa Catarina and Espirito Santo. Energy Secretary Peter Greiner believes
a shortage is likely beginning in 1997, as do large scale consumers.
Rates of growth of electric energy demand by region
(%/YEAR)
1995-2000 2000-2005 2005-20102010-2015
North
8.4% 8.4% 6.7%5.9%
Northeast 6.8% 7.0% 5.4%5.2%
Southeast 4.9% 4.4% 3.5%3.4%
South
5.5% 6.3% 5.1%4.9%
Central/West7.9%
7.2%
6.7% 6.1%
Total
5.7%
5.6%
CAPACITY AND INVESTMENTS NEEDED TO MEET
SCENARIO III
But others disagree. They point out Brazil’s energy supply system is
designed to meet peak demand. An energy shortage would occur only
with the combination of insufficient rain, excess demand and lack of
investment. Moreover, investments are being resumed, albeit later than
desirable.
4.5%4.4%
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Only the Southeast appears significantly at risk. However, the region’s
reservoirs presently have sufficient water, and in the extreme South,
reservoirs are filled to the top, following a late heavy rainy season. The view
of top power sector officials is that if the present projects go ahead, there
will be no energy shortage.
Northeast and Southeast systems, and the Southeast system with those of
neighboring countries: Argentina, Uruguay and Bolivia. Besides the Itaipu
joint plant with Paraguay, the only important connections thus far between
Brazil and its neighbors are the 70 MW standby Foz do Iguacu Acaray line
(Paraguay) and a 30 MW Uruguayana Paso de Los Libres line (Uruguay).
Because Brazil’s system operates at 60 Hz while its neighbors operate at 50
Hz, the international links need a conversion system. New technologies
have now made conversion less costly.
Electricity requirements in the year 2015, by sub-systems
Under Scenario III of Plan 2015
MWh/year
A proposed link between the Northeast system and the South has gained
considerable importance since the resumption of construction on the Serra
da Mesa hydroelectric plant, near Brasilia. The rainy seasons in the North
and the South alternate, so both areas stand to gain. Eletrobras plans
to connect the two systems in Brasilia. One line under study would go
northeast to Imperatriz; the other would go north to Tucurui. Both would
be about 1,500 km long and cost around US$1 billion.
1) South
113,500
2) Southeast +
Central/West
407,500
3) Northeast
+
Maranhao
116,670
4) Tocantins Total2,319
5) Greater Belem + Greater Sao Luiz + North Para + Tocantins 17,700
6) Sao Felis +
Xingu
43
7) Altamira
+
Senator Porfirio
330
8) Jacareacanga 19
9) Santarem +
Itaituba
1,500
10) Acre + Rondonia + Amazonas Left
8,910
11) Roraina + Anapa + Elnorte + Manaus + Amazon left
13,970
12) Greater Belem
28,482
13) Greater Sao Luiz
30,610
The following connections with neighboring countries are possible:
Argentina
• Upgrading the connection between Uruguayana, Brazil, and Paso de los
Libres, Argentina, from 50 to 450 MW, and later to 1,000 MW;
• Two conversion units of 450 MW each at the 1,600 MW Garabi
hydroelectric plant in Argentina, whose construction is slated to begin
around 2001;
Source: Eletrobras Plan 2015.
Integrating National And International Grid Connections
• A 50 MW connection between Sao Borja, Brazil, and Santo Tome,
Argentina.
The next expansion stage of Brazil’s electric power system will almost
certainly emphasize improvement in grid connections, by linking the
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Uruguay
• Construction of a 500 KV line between the Candiota thermoelectric plant
in Rio Grande do Sul and the Uruguayan system, to allow joint Brazilian
Uruguayan development of the Candiota coal mines;
• A 350 MW line between Presidente Medici in Brazil and San Carlos in
Uruguay.
Venezuela
• A 600 KM, 500 KV line that would carry excess energy from Venezuela’s
Guri hydroelectric facility to Boa Vista, Brazil. The line could be extended
an additional 800 km to Manaus.
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Chapter 5
Key political players
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Private key political players
Summary
The PFL and Brazil’s major building contractors have long shared a
strong affinity that now gives the contractors both a practical and legal
advantage in the current reshaping of the electricity sector. Some of
the country’s major building companies are based in Bahia, which is
Magalhaes’ political stronghold. Building contractors also have been
the major source of financing for political campaigns in Brazil. Not
surprisingly, the contractors are strongly tied to hydroelectric power, thus
tending to reinforce the “hydroelectric culture” that prevails.
Possibly no sector in Brazil is as firmly under the control of a political
party as is the electricity sector under the Liberal Front Party (Partido da
Frente Liberal, or PFL). Companies involved in power development might,
therefore, wish to understand the dynamics of PFL leadership and its
strong connections to the local construction industry.
The PFL was able to consolidate its control over the electricity sector
after President Fernando Henrique Cardoso took office, because the PFL
became the main supporting party of the ruling coalition in congress. The
other wing of the ruling coalition is President Cardoso’s Brazilian Social
Democrat Party, or PSDB). It also has a strong hand in power issues
because it controls the governor’s office in three key states: Sao Paulo, Rio
de Janeiro and Minas Gerais. But it is the PFL that really controls the
power apparatus at the federal level.
The major building contractors based in Bahia are led by Odebrecht,
Brazil’s second largest construction firm. Odebrecht has close ties to
Senator Josaphat Marinho, who is a “carlista,” as the followers of Antonio
Carlos Magalhaes are called. Other important firms are OAS, headed by
Cesar Mata Pires, son‑in‑law of Antonio Carlos Magalhaes; Construtora
Suarez, belonging to Carlos Suarez, who is also a partner in OAS; and
the smaller CEPEL, which was directed by former PFL deputy Manuel
Tanajura.
PFL politicians now in high‑level electricity‑related posts include Mining
and Energy Minister Raimundo Brito; Minister for Environment and
Water Resources Gustavo Krause, once the mayor of Salvador, Bahia; and
National Secretary of Energy Peter Greiner. Greiner, 54, is overseeing the
electricity sector restructuring.
The PFL Profile
The PFL is Brazil’s largest conservative party. Its undisputed leader is
former Bahia governor and now federal senator Antonio Carlos Magalhaes,
who is considered one of Brazil’s most powerful and resourceful politicians.
He is the ruling coalition’s mastermind. The party’s electricity expert
is Eliseu Resende, presently a federal deputy for the PFL. Resende was
governor of Minas Gerais and finance minister for a brief period in the
early 1990s. He is now chairman of the mining and energy committee of
the chamber of deputies. Most of the changes now being introduced were
designed by him.
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The new chairman of Eletrobras, 47‑year‑old Antonio Jose Imbassahy,
is a PFL politician who had also been elected governor of Bahia with the
support of Antonio Carlos Magalhaes, to whom he is closely linked.
Brazil’s new attorney general, who plays a key role in making sure the
changes proposed for the sector are legal and that the public biddings are
conducted properly, is 46‑year‑old Geraldo Brindeiro of Pernambuco. He
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Private key political players
is a cousin of vice president Marco Maciel, one of the main leaders of the
PFL. Maciel himself occupies a central position in the administration as
the president’s troubleshooter. The rapporteur of the main laws affecting
private sector involvement in power concessions is the PFL federal
deputy from Bahia, Jose Carlos Aleluia Costa. He sits on the mining and
energy committee. Aleluia Costa is also closely linked to Antonio Carlos
Magalhaes.
Finally, several regional posts in the mining and energy ministry were
given to PFL politicians or their proteges. One example is Guido Ruckl,
named to the Santa Catarina office.
Special Syndicated Intelligence Report: The Privatization of Brazil’s
Electricity Sector
Copyright ©1995 Latin American Information Services, Inc.
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Chapter 6
Modernizing the regulatory structure
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Summary
power sector; and 4) setting and reviewing tariffs. Besides the twovolume,
600page national waters code, DNAEE has another two volumes of its
own regulations, called portarias. Power companies constantly await new
DNAEE portarias.
To cope with privatization, the Mining and Energy Ministry (MME) is
preparing to substantially strengthen the government’s regulatory powers
by strengthening the main regulatory agency, the Departamento de Aguas
e Energia Eletrica (National Department of Water and Electric Energy,
or DNAEE). The federal environmental protection agency, Instituto
Brasileiro de Meio Ambiente e dos Recursos Naturais Renovaveis (Brazilian
Institute for the Environment and Renewable Natural Resources, or
IBAMA), will also be strengthened. An energy conservation programs is in
existence, but it has no organic relation to the DNAEE. Some regulatory
proceedings will be delegated to state agencies that have yet to be created.
DNAEE will have to design entirely new procedures. But skeptical officials
do not believe DNAEE will ever be independent of the large government
power companies.
Scant Resources for DNAEE
In practice DNAEE lacks the personnel, expertise and power to exercise
its regulatory duties under the law. Most of its portarias are written
elsewhere, by the very power companies it is supposed to regulate. Over
time it has been reduced to rubberstamping the finance minister’s decisions
on tariffs, the mining and energy minister’s decisions on concessions, and
Eletrobras’ and state utilities’ decisions on most matters concerning energy.
DNAEE has only 30 officials of its own. Under the Collor
administration, the agency’s 12 regional offices were closed. To be able to
carry out its duties, it borrowed 120 officials from the power companies
it was supposed to regulate and another 100 from MME’s mining and
prospecting company, CPRM. DNAEE lacks the analysts and other
experts needed to prepare the public tender notices that the new laws
require for each concession. Accordingly, corruption at DNAEE has been
negligible, in proportion to its powers. In the past, concessions were
abruptly canceled or changed due to direct interference of state governors
or local power companies.
Modernizing the regulatory framework for gas is even more problematic.
The federal agencies that regulate natural gas and oilbased fuels are either
ridden with corruption or under the direct control of Petrobras, which
stoutly resists any invasion of its territory.
Historical Background
DNAEE was created as a department of the Mining and Energy Ministry
to implement the 1934 national waters code. It has authority over all the
nation’s water resources, with the specific tasks of 1) granting or revoking
authorizations and concessions for studies or use of public water resources;
2) regulating concessionary companies; 3) issuing regulations for the
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A New Independent Regulatory Agency
for setting up consumer councils and seeing that the concession rules
are enforced will almost certainly be transferred to state agencies. Also,
the entire concession process for small plants — up to 10 MW — will
probably be transferred to the state agencies. But DNAEE will retain the
ultimate say and the power to intervene in cases of abuse.
The government is proposing to substantially strengthen DNAEE by
transforming it this year either into an autarquia, the most common
type of independent public agency in Brazil, or into an altogether new
kind of regulatory agency, which would serve as a model for other areas
of administration. Based on a preliminary study, the latter type will be
chosen. It would have a staff of about 400. The details of how the new
type of regulatory agency would operate are in a proposal to be submitted
to congress soon by Administration Reform Minister Bresser Pereira.
In comparison with the autarquia, the new type of agency would have
more freedom to hire and fire personnel and to charge for its services. Its
chairman would be nominated by the president for a defined term.
The main effects of the decentralization of regulatory powers will
probably be to strengthen regional politicians’ and state governors’
influence on the power sector, as well as that of the state power companies.
There is also risk of outandout corruption, because — as opposed to
DNAEE — existing departments of water resources in some states have
been marked by high incidences of corruption. The decentralization
system, as well as the apportioning of the various tasks, will be defined
around the beginning of 1996.
The strengthened DNAEE might include a consultative or arbitration
council, with authority to review decisions after appeals by the interested
parties. The same model would be extended to the IBAMA, which would
charge for both regulation and granting of concessions. The authorities
aim to simplify proceedings by eliminating red tape, and to strengthen the
mechanisms for protecting the public interest, such as consumers rights
and environmental protection.
Call For Consultants
To help shape the new system and to cope with the already increasing
workload, DNAEE has begun four public tender proceedings to contract
consulting companies. One company will provide the methodology for
evaluating power projects from the engineering standpoint (electrical,
mechanical and construction), another will provide economic and
financial evaluation methods, the third will provide evaluation methods for
conservation and efficiency of energy supply and distribution systems, and
the fourth will provide an institutional and public relations framework.
A Role For The States
Instead of restoring regional offices, DNAEE will delegate some of
its regulatory powers to state authorities. A protocol to draft the new
system was signed in August 1995 between DNAEE and all state energy
secretaries. States will have to create the agencies. The responsibility
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Environmental Protection
no proper national guidelines for the use of gas on the scale that is now
being proposed. A further complication is that the distribution of natural
gas and related regulations are currently handled by the states. Because gas
pipelines and distribution systems tend to cross state borders, there will
have to be a national system of norms and guidelines. (See Chapter, The
Thermoelectricity Option.”)
IBAMA has authority to issue national environmental protection
regulations and to grant clearance for projects in areas under federal
jurisdiction, such as national parks or indian preserves. Otherwise,
the clearance is given by state authorities. All projects must receive
environmental protection clearance. The regulations are set at the state
level, but standardized by a national environment council.
The regulatory agency for gas (equivalent to the electricity sector’s
DNAEE) is the Departamento Nacional de Combustiveis (National
Fuels Department, or DNC). However, the agency has no power against
Petrobras. Its bureaucratic structure is almost exclusively devoted to the
domestic liquefied gas market, which is cartelized among half a dozen
private companies and is also facing various accusations of corruption.
Liquefied gas, distributed door to door in small pressurized vessels, is
Brazil’s main domestic cooking fuel. The DNC itself has been under
congressional scrutiny following suspicions of corruption.
IBAMA is a new agency, active in minor issues, and impotent regarding
the big interests that affect the environment. But it now being run by
a very active young politician, 43yearold Raul Jungman, a member
of the communist party, now renamed the Partido Popular Socialista
(PPS). Under his direction, IBAMA is contracting hundreds of lawyers
on a freelance basis, to proceed with some 150,000 legal actions against
companies accused of violating the environmental protection code. (One
so accused is the federal power generator Chesf.) The government may
soon introduce the “Green Stamp,” which will require full environmental
protection criteria to be met before any project can be cleared by any
government agency.
Outlook For The Regulatory Reform
Some top officials are skeptical of whether DNAEE will get real
regulatory powers. The issue is not administrative, but political. In the
past, DNAEE had no real authority because the power system was run
as a statecompany cartel only limited by a few government policies, in
particular those concerning foreign indebtedness and tariffs. Strengthening
and modernizing DNAEE is not difficult in and of itself. It is also an
objective need of the privatization process. But the recasting of DNAEE
will have to reflect real changes in the system’s ownership.
The Gas Regulation Bottleneck
The lack of regulations and modern regulatory agencies is the main
obstacle to the privatization of the natural gas industry. Gas production
and imports have been a Petrobras monopoly since 1954. The company
took over regulatory and planning functions as though they were an
internal company concern, rather than a national concern. Thus, there are
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If the state companies retain hegemonic control of the transmission
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system, they and not DNAEE will set transmission tariffs, in the
manner of any conventional cartel. Presently, tariff policies are set by the
cartelstyled joint managerial committee (Comite de Gestao Empresarial do
Setor Eletrico, or COGE), created by the 54 large state power companies
and by a forum of the state energy secretaries. There is likely to be a long
transitional period during which the private sector will have minority
status and competition will be limited.
The Energy Conservation Program
The energy conservation program (Programa de Conservacao Eletrica,
or PROCEL) was created by the federal government in the mid 1980s, as
a direct result of the second oil crisis. But PROCEL has proceeded slowly.
Since its inception, the program has invested only US$24 million, mostly
in measurement equipment designed to impede energy theft. To date,
the program has saved some 295 GWh of energy per year, equivalent to
an installed capacity of 60 MW. PROCEL aims to achieve savings of 105
TWh/year by the year 2015 under Plan 2015’s Scenario III, which would
equal 14% of projected demand. Loss of energy due to theft and other
(technical) reasons now amounts to 13% of the market. The aim is to
reduce such losses to 7% by the year 2015.
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Chapter 7
How the tariff system is structured
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Summary
with higher costs — mostly in the Northeast — were compensated for the
difference between the guaranteed return and the actual return through
a compensation account known as Contas de Resultados a Compensar
(CRC). Some of the earnings of companies whose costs were lower (mostly
in the South) were debited to this account. The policy eventually led to
an accumulation of credits and debts between Eletrobras and the various
companies that were never paid.
To pave the way for the financial reorganization of the electricity sector,
a new tariff law was introduced in 1993. The law eliminated the national
equalized tariff and gave concessionaires responsibility for calculating
their own tariffs, according to a formula that set out defined parameters.
The law also established a mechanism to periodically revise tariffs. New
concessionaires must set forth their tariffs in their concession contracts.
The national equalized tariff itself fell from an average of US$83/MWh
in the 1970s to US$65/MWh in the 1980s, plunging as low as US$46/
MWh on the eve of the 1993 changes. Return on capital declined in the
1970s from the statutory maximum of 12% to the statutory minimum
of 10% and then to 8% in 1988. At that point, a tariff recovery plan
was negotiated with the World Bank, which has been traditionally very
involved in Brazil’s electricity sector. The plan was never implemented and
the sector lost all creditworthiness. With debts piling up, return on capital
for government companies plummeted to a negative 4% in 1991.
But concern lingers that the new law does not provide sufficient
guarantees, especially against interference from economic stabilization
packages. Such packages have become regular instruments of economic
policy in Brazil, suppressing or violating legal contracts for long periods of
time. These packages are considered legitimate government acts taken in
the national interest by the courts. The last package, the Real Plan, gave
the finance minister exclusive power to determine tariffs, which were then
frozen for more than a year, despite monthly inflation ranging from 2% to
3%. Another source of concern is the absence of comprehensive legislation
concerning charges for use of transmission lines by independent producers.
In early 1993, after intense debate within the electricity sector
technocracy, it was decided to discontinue the national equalized tariff and
institute a policy of aggressive “tariff recovery.” The CRC’s balance was
zeroed out by offsetting companies’ credits against debt that had become
junk claims nobody believed would be paid. An estimated US$25 billion
in debts were canceled or absorbed by the national treasury. Tariffs were
immediately revised up from a low of US$35$40/MWh (weighted average)
to US$60/MWh, very close to the World Bank recommended tariff of
US$67/MWh.
Historical And Political Background
The chief cause of disarray in the electricity sector is the slashing of tariffs
to fight inflation. DNAEE’s traditional formula for determining tariffs
was based on Articles 178 and 180 of the waters code, which stipulated
that tariffs must cover the cost of providing the service plus a guaranteed
return ranging from 10% to 12% of invested capital. But a national
equalization policy for tariffs was introduced in 1974, under which utilities
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The New Structure
because the rate of return is guaranteed and therefore fixed. (Profits can
only be increased if capital invested is increased to increase the supply,
for example.) But to the extent that largescale consumers shift from one
supplier to another some longterm productivity gains may result.
Law 8631, enacted on March 4, 1993, revolutionized the tariff system
by: 1) eliminating the principle of the national equalized tariff; 2)
eliminating the compensation account (CRC); 3) transferring to the
companies the task of submitting their tariff proposals to DNAEE, rather
than the other way around; 4) giving companies liberty both to set special
tariffs for specific classes of customers or specific seasons, and to sign
supply contracts with other concessionaires; 5) introducing the concept of
marginal cost per specific unit, instead of average national marginal cost.
Average tariffs and share of energy by classes of consumer
1994
TariffEnergy Share
US$/MWh
(%)
Each utility calculates the proper rate, according to a formula detailed by
Decree 774 (March 18, 1993), and submits it to DNAEE. The formulas’
parameters, particularly those pertaining to marginal capital costs, were
determined after a national independent costs audit was carried out
encompassing all the utilities. The formula aims to assure the 10% to 12%
statutory return on capital determined by the old waters code, as well
as the waters code’s principle of maintaining the utility’s economic and
financial stability at all times. The parametric formula also includes the set
price of electricity purchased from Itaipu, which is compulsory for some
companies, or the price of electricity bought elsewhere. It also includes
a formula for the reversion of assets to the federal government after 30
years for hydroelectric plants and after 20 years for thermoelectric plants.
Provisions for payment of dividends, the cost of debt service, and the costs
of running the services are also included.
Industrial47.6949.8
Residential77.4224.0
Commercial91.2011.9
Others55.9414.4
Weighted average: US$ 61.23/KWh
Sources: Tariff information is cited in “Electric Power in Brazil,” report by J.P. Morgan, July
1995. Energy share is in Eletrobras Plan 2015. Selfproducers are excluded. The “Others”
category includes rural and government supply.
Application Process
The new policy aims to restore the system to financial health in the
short term, to pave the way for privatization in the medium term, and to
stimulate expansion. It does not in principle stimulate productivity gains,
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Tariff proposals are submitted to DNAEE on the agency’s standard form,
called Plante, regulated by Portaria 176, dated March 29, 1993. Besides
defining the principal costs affecting the tariff being requested, the utility
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Tariff Criteria For Public Service And SelfProducers
must provide information on market behavior, and on its own operating
revenue and cash flow. Under Law 8631, DNAEE has two weeks to accept
or reject the proposed tariff. If the agency fails to respond, the tariff takes
effect automatically. Decree 774 provides a detailed formula for revising
tariffs to compensate for inflation. It also permits gradual tariff increases.
For publicservice concessions, the most important award criterion will
be the tariff itself. The bidder who offers the lowest tariff will probably win
the concession, and the tariff will be written into the concession contract
along with the mechanism for readjustment and periodic revision. The
contract is considered the concessionaire’s main and — perhaps only
— guarantee against government attempts to lower tariffs. Thus, close
attention must be paid to the terms of any concession contract.
Applications for tariff readjustments may be filed at any time, depending
on how costs evolve. The parametric formula must be revised every three
years, and may be revised more frequently in exceptional cases. Energy
supply contracts between companies must be submitted to DNAEE
for approval before being signed. Law 8631 also requires publicservice
concessionaires to create a consumer council with representatives of all
types of consumers, to monitor and evaluate tariffs and quality of service.
The principal criteria for awarding concessions to selfproducers will be
the amount of capital invested and the scale of assets added to the system.
DNAEE has stated that it will not allow companies to simply claim any
costs on the Plante tariff application form. Furthermore, it will demand
cost reductions, especially for overstaffed government companies. The
agency will check cost information in the data base it compiled through
the national audit.
Recasting The Tariff Adjustment System
Later this year, DNAEE will commission a broad study to establish a
system for regular tariff revisions. The thinking is to adopt the Canadian
system of revising costs each time a readjustment is requested, as
opposed to a straightforward correction based on past inflation rates.
The government favors the Canadian approach because it fits well with
the overall policy of abandoning indexation and stifling the culture of
inflation.
Protest Against Tariff Tax
Still unsolved is a controversy over the longstanding 3% tax on tariffs,
known as the Reserva Global de Reversao (RGR), created in 1971 under
Law 9631. The funds are appropriated by Eletrobras and used to finance
various programs, in particular energy conservation projects. But many
government companies are refusing to pay the RGR and have mounted
court challenges to its legality.
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However, it is not clear yet that the government will be able to stick to
this plan. Interestingly, Escelsa’s public bidding notice did not include
any mention of tariff indexation. The bidding notice came out just as the
government announced deindexation as a priority, and thus it would have
been impolitic to write an automatic readjustment trigger into the bidding
papers. However, many power analysts believe the option of introducing
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an indexation clause at upcoming concession auctions, to ease the worries
of potential bidders, is still open.
MWh for more than 200 KWh. A J.P. Morgan study has applied the
Escelsa residential tariff structure to national residential demand, reaching a
composite average rate of US$54/MWh and an average monthly residential
bill under US$8. DNAEE will probably raise the minimum charge to R2.00.
Lower Subsidies
The study is also expected to recommend that the current 83% subsidy
for residential consumers who use less than 30 KWh per month be
reduced. In addition, the joint managerial committee (COGE) formed
by the large state energy companies and the state energy secretaries
has requested that DNAEE consider reducing subsidies for residential
consumers who use up to 200 KWh per month. Most residential users
consume between 100 and 200 KWh per month.
•What will happen to subsidies for electricityintensive industries? These can
run as high as 40%. Some of the Japanese joint aluminum ventures in Para
are subject to subsidizedtariff contracts that do not expire until the year
2004. The aluminum industry has been proposing “commodity pricerelated
tariffs” for years. These would correlate aluminum producers’ electricity
tariffs with the international price of aluminum. In periods of boom (and
therefore higher tariffs), a percentage of the money would be deposited into
a fund that would compensate utilities for lower tariffs during periods of
aluminum market depression.
Question To Be Resolved
•What will be the fate of regional subsidies? The government’s trend is to
allow some kind of subsidy to the Northeast system. There is also special
legislation to subsidize electrification of rural areas.
•What will be the outcome of the ongoing legal dispute over tariffs for
micro and small companies? Antitrust agency CADE is examining a 1994
complaint by SIMPI, the trade association of small and micro companies,
against DNAEE and 55 concessionaires because of a policy of granting
lower tariffs to large industries. SIMPI claims that Article 179 of the
constitution grants preferential treatment to micro and small companies,
but that the opposite occurs in practice. While small and micro companies
pay an average of US$95.10 per MWh, large companies (with lines
exceeding 230 KV) pay an average of US$31.45 per MWh. In response,
the concessionaires claim that the tariffs are based on costs, and that it
is far more costly to transmit at a lower voltage. Still, the issue remains
unresolved.
Various legal and technical problems continue to affect tariffs. Some of
them will only be solved after the overall structure of the power system
is established, especially the destiny of government holding company
Eletrobras. Among them:
•How will the cost of transmission be determined when one generating
utility uses a transmission line belonging to another utility, probably a
stateowned one?
•What will happen to the tariffs charged to low-income consumers who use
less than 30 KWh per month? When Escelsa was privatized, lowincome
consumers retained hefty subsidies: US$21.35/MWh for consumption up
to 30 KWh as compared to US$50.86/MWh for those in the 31100 KWh
bracket; US$80.30/MWh for the 101200 KWh bracket; and US$112.89/
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•Is there a way to guarantee future earnings? According to Paragraph 28
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were denominated in URVs as well, which meant they were adjusted for
inflation on a daily basis. During the first stage of the stabilization plan,
electricity tariffs benefitted. But when the real itself was introduced in July
1994, tariffs were frozen. Average residential tariffs in the Sao Paulo area
went down 7% below what they had been May 1994. Industrial tariffs
remained stable, on average 16% above the 1993 tariff.
of the concessions law, concessionaires asking for financing from official
institutions must give additional guarantees besides future tariff earnings.
Prospective independent producers fear that authorities are trying to
preserve the power to impose unrealistic tariffs any time they feel it
necessary to fight inflation or for other reasons.
•Will the tariff level for large users be set sufficiently high? Prospective
independent producers fear that the average US$31.45/MWh tariff paid
by large or electricity-intensive industries (their preferred customers) is
incompatible with a favorable rate of return.
In late August 1995, the government announced that it might,
after all, permit a tariff revision. In July, when utilities had expected a
readjustment after the first anniversary of the Real Plan, the government
announced a postponement, claiming that during the oneyear period of
monetary stability companies were supposed to have achieved substantial
productivity gains. In the meantime, the Real Stabilization Plan
presidential emergency decree (medida provisoria) became law. Thus, the
finance minister is legally authorized to determine tariffs on his own, and
there is nothing utilities can do about it.
RESIDENTIAL ENERGY CONSUMPTION
Amount
Number of Consumers
KWh
(millions)
Share of Residential
Energy Supply (%)
0-100
11.2
100-2009.17
201-3003.5
301-4001.2
>4001.2
13.7
31.7
21.7
11.4
21.5
Some utilities say their tariffs have declined up to 33%. In an
environment where monthly inflation is regularly 2% to 3%, delays in
tariff revisions are costly. The government policy has been to delay tariff
readjustments as much as possible and, when inevitable, to grant them
only gradually. On the other hand, the government doesn’t want to
return to the unrealistic tariffs of previous years, because it doesn’t want
to discourage privatization. Seven state concessionaires that implemented
important costsaving programs were promised, at the time this report was
being written, a 10% to 20% increase: Copel (Parana), Coelba (Bahia),
Celesc (Santa Catarina), Enersul (Mato Grosso), Cemig (Minas Gerais),
Cepisa (Piaui), Coelce (Ceara). The energy secretaries of the major states
are meeting to demand that the federal government institute a policy that
guarantees adequate electricity tariffs.
Source: Eletrobras Plan 2015 (data from 1990)
The Stabilization Plan Threat
Even if new laws, regulations and concession contracts guarantee
favorable returns for utilities, the federal government’s economic packages
can override them. It is already happening to a degree. In 1993 tariffs were
fully restored. In May 1994, the URV currency index was introduced
as a preliminary step in the Real Stabilization Plan. Electricity tariffs
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Electricity tariffs in sao paulo
(Annual and Quarterly Averages in August 1994 R$)
ResidentialIndustrial
101-200 KWh
88 KV-138 KV
198946.0323.72
199063.2321.76
199170.2421.57
199277.2423.89
199378.4020.95
199493.4023.79
1994
I93.6123.64
II
99.0324.50
III
92.8424.32
IV
88.1122.71
1995
I84.7320.25
II
80.6219.26
Notes: Values are for the CESP area and were deflated by the General Price Index (IGP/DI); to
obtain values in US$, multiply by 0.93. Source: Indicadores IESP
Escelsa’s proposed residential tariff
Monthly Consumption
Tariff (US$/MWh)
Up to 30 KWh
21.35
31100 KWh50.85
101200 KWh80.30
Over 200 KWh
112.89
Source: Escelsa, cited by J.P. Morgan.
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Chapter 8
The thermoelectric option
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Summary
nuclearpowered Angra I (657 MW), and excluding plants under 10
MW, 6.6% of Brazil’s total 58,686 MW electrical capacity comes from
thermoelectricity. Hydroelectric plants provide 93.4% of total capacity, or
54,784 MW.
The drive to increase thermoelectric power is fundamentally hampered
by the longstanding preference for hydroelectricity, a preference that is
reinforced by the availability of an additional 14,600 MW of untapped
firm hydroelectric capacity costing less than US$40/MWh, including
longdistance transmission costs.
National energy secretary Peter Greiner wants to diversify the sources
of power production and has recommended an increase in gas and
coalbased energy. But the power sector technocracy is culturally addicted
to hydroelectricity, of which there is an abundance of untapped resources.
(Brazil has up to 250 GW of hydroelectric capacity, of which only 54 GW
has so far been tapped.)
The BoliviaBrazil pipeline is the centerpiece project for increasing the use
of gas in the power matrix. But the pipeline project is still hampered by
fundamental disagreements. These include questions of scale (whether it
should be anchored by a large scale plant or rather be used to service many
smaller plants); of financing (the role of private and multilateral banks
and the role of Petrobras); of pricing (should all gateways be charged the
same price); and of regulation (for a privatized market). Nevertheless, the
government has signalled its support for stimulating the gas market by
making gas-fueled vehicles an option for all. Until recently, only taxis and
special vehicles were authorized to have gas-powered engines.
Thermoelectricity Mooted For The Northeast
During discussions for Plan 2015, it was calculated that if thermoelectric
capacity on the Eastern Coast were increased, Northeastern Brazil’s
supplementary firm energy capacity could be expanded at a reasonable
cost, resulting in reduced dependency on hydroelectricity. Thermoelectric
plants, fed by imported coal, could thus fulfill the goals of the aborted
12,000 MW nuclearpower program. Brazil’s coal is of poor quality, with
more than 45% ash content. The coal is inconveniently located in the
distant South. Gas is considered too valuable to be used in thermoelectric
plants.
Other less spectacular thermoelectric projects are under discussion. In
Rio Grande do Sul, more than 4,000 MW could be added to national
capacity by using lowquality coal in fluidized coldbed plants. Cemig is
studying whether to set up large thermoelectric plants in Minas Gerais,
fueled by imported coal. Petrobras gas reserves in Urucu will fuel small and
mediumsized thermoplants in the Amazon.
But in the end, energy officials did not make any strong commitment
to increase thermoelectricity. Using as reference a 2,500 km, 600 to 800
KV directcurrent transmission line from the lower Xingu River to Belo
Horizonte, the Plan 2015 team concluded that transmission costs from the
Amazon basin would add only US$16/MWh, which includes an estimated
Historical And Technical Background
With only 3,902 MW of thermoelectric capacity, including
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Gas And Coal
7%10% power loss during transmission. The cost for hydropower was
considered competitive with thermoelectricity costing US$1,200/KW
installed capacity with a 14% yearly rate of capital return.
Brazil’s technical experts prefer gas and coal for thermoelectric plants. Oil
is eliminated as an option because — in addition to environmental and
other reasons — Brazil still imports 40% of the 1.5 million barrels per day
it consumes. The country will probably achieve oil selfsufficiency before
the year 2000 at an approximate cost of US$15 per barrel. Eletrobras’
Plan 2015 operates under the assumption that the international price of
oil will be between US$17/barrel and US$32/barrel by the year 2000, and
between US$25 and US$45 by the year 2015. However, by then Petrobras
would be producing increasing amounts of natural gas.
Plan 2015 outlined three possible strategies for thermoelectricity:
•Strategy A, in which hydroelectric plants would be built down the Xingu
river until the year 2004 and then in the rest of the Amazon River basin,
making thermoelectric plants unnecessary before 2015 even if the economy
were to grow according to scenario IV, which is the most optimistic
forecast;
•Strategy B, in which Amazon hydroelectric potential remains completely
untapped, meaning a large number of thermoelectric plants would be
needed by the year 2010;
•Strategy C, in which Amazon hydroelectric potential would be tapped
beginning in the year 2010. Thermoelectric plants would be needed by the
year 2010, but only in the Northeast.
Brazil’s oil and gas reserves (1993)
GasOil
billion cubic meters
billions barrels
Thus, all three strategies contained a recommendation to consider using
thermoelectricity during the latter part of Plan 2015.
The costs of the alternatives to hydroelectricity were listed as follows, in
US dollars:
Oil$43/MWh
Gas$42.8-$45/MWh
Asphalt Residue $48/MWh
Domestic Coal $38$48/MWh
Imported Coal $51/MWh
Nuclear$50$63/MWh
Proven Total
East Coast
Urucu River
Jurua River
115.2
18.3
3.5
TOTAL
137.0305.0
Source: Petrobras
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252.3
35.5
17.2
ProvenTotal
4.0
0.04
-
13.9
0.1
-
4.0 14.0
Bernardo Kucinski
Gas from the East Coast is already targeted for direct industrial use.
Daily production totals 21 million cubic meters, with half coming from
the Northeast and half from the offshore Campos basin. The Campos
basin has the greater potential. Presently only 47% of Campos basin
gas is used to supply the market. Up to 16% is reinjected to increase oil
production, in accordance with Petrobras priorities. Up to 14% is used to
run the oil platforms, which lack other sources of energy. And 16% is lost,
due to technical reasons. Only some 3.5 million cubic meters of Campos
basin gas is available for the Southeast. The state of Rio de Janeiro takes
about 1.5 million cubic meters per day; Sao Paulo takes 1.4 million from
Campos and another 1.4 million from the Santos offshore fields. Rio de
Janeiro, Sao Paulo and Minas Gerais all need more gas urgently and are
demanding extra allotments. Petrobras forecasts that it will be able to
increase the Campos basin gas supply by 2 million cubic meters by 1997.
NATURAL GAS PRODUCTION
(Millions of cubic meters per day, 1994 average)
Amazon842
Ceara240
Rio Grande do Norte
2,096
Alagoas1,460
Sergipe2,067
Bahia4,377
Espirito Santo655
Rio de Janeiro
8,005
Santos Basin1,731
TOTAL21,381
Source: Petrobras
The largest potential gas sources are in the newly discovered gas fields of
Urucu, in the heart of the Amazon basin, 600 km south of Manaus, and
in the largely underdeveloped Santos offshore basin. Petrobras estimates
that Urucu output could be easily trebled to 2.6 million3 million cubic
meters per day, and Santos output could reach 8.2 million cubic meters
per day. Altogether, gas production is due to increase by 10 million cubic
meters per day within the next five years, to about 30 million cubic meters
per day. Petrobras estimates that with larger investments (which require
congressional approval), gas production could reach 55 million cubic
meters per day between the years 2000 and 2003.
Urucu Gas For The Amazon
The Urucu gas fields are a recent discovery and Urucu gas is making
energy generated by gasfired thermoelectric plants the natural solution for
electricity supply in towns scattered throughout the Amazon. Many towns
are already served by oilfired thermoelectric plants and suffer occasional
blackouts. Petrobras has already invested US$1 billion in developing gas
at the Urucu fields, which are located at juncture of the Urucu and Jurua
rivers, some 600 km south of Manaus.
Small, gasfired thermoelectric plants are the best solution for the
scattered Amazon villages and towns. The potential hydroelectric sources
are too large for any area but Manaus. Transmission lines are very costly in
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the Amazon, and the distances that would have to be covered are very long
for the size of the populations to be served. For example, transmission costs
for the BalbinaManaus line added US$30 to the cost of the MWh. The
projected 1,059 km, 230 KV TucuruiAltamiraSantarem line won’t serve
a population large enough to justify its construction until after the year
2000. In the Amazon area, electricity consumption is only 559 KWh per
capita, about onethird of the national average.
originally estimated at US$3.8 billion during the next five years, to install
3,120 MW of capacity. The plants were subsequently scaled down to 1,970
MW, as follows:
Urucu and Jurua gas would be liquefied at minus 162 degrees centigrade
at the town of Coari, close to Urucu, and then taken by cryogenic ships
to Manaus and Porto Velho (in the state of Rondonia), where it would
be used to fuel thermoelectric plants. Preliminary estimates suggest that
transporting gas from Urucu to Manaus would cost US$1.80/BTU,
compared to US$8.00/BTU for oil. The project would cost Petrobras an
additional US$107 million in investments and could be completed by
1997, slashing the cost of electricity generation in Manaus and Porto Velho
in half. At present, the gas associated with oil is reinjected.
•Maua 7 & 8, a 240 MW Eletronorte project also in Manaus, to be offered
in public bidding in January 1997;
•Caiari, a 240 MW Eletronorte project in Porto Velho, to be offered in
public bidding in January 1997;
•Maua 5 & 6, a 50 MW Eletronorte authorization in Manaus;
•Rio Negro, a 1,440 MW Eletronorte authorization in Manaus;
In addition, the following plants will be converted to gas:
•Aparecida, Manaus 83.9 MW
•Mauazinho, Manaus137.2 MW
•Electron, Manaus
The main technical problems are related to river transportation of
liquified natural gas. There are ocean ships designed to transport gas, but
not river boats. They would have to be designed and built at considerable
cost.
•Rio Madeira, Porto Velho
79.7 MW
Increased use of gas, along with the completion of Tucurui II (2,300
MW) and the Samuel hydroelectric plant, will be enough to serve the
big cities of the North until the year 2010. But there is still room for
many small thermoelectric plans in the Amazon area, which could be
fueled by Urucu gas. Areas not located along the prospective routes of
the TucuruiSantarem line — or any other prospective line — would be
excellent locations for small thermoelectric plants. Eletronorte is already
studying the possibility of setting up small gasfired plants along the rivers
of the Amazon basin.
A program to convert oilfired thermoelectric plants to gas has already
been negotiated between Petrobras and Eletronorte. The Manaus plants
alone may need up to 2 million cubic meters per day. Porto Velho’s 60
MW diesel oil-fueled plant will be converted to gas and expanded in 1998
to 240 MW, to make the gas transport feasible. A transmission line could
be extended from Porto Velho to reach the fastgrowing town of Vilena.
Investments in new Manaus and Porto Velho thermoelectric plants were
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120.0 MW
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The Bolivia Brazil Pipeline
DISTRIBUTION OF BOLIVIAN GAS
(billions of cubic meters)
The BoliviaBrazil pipeline is designed to supply 8 million cubic meters
of gas by the year 1997, gradually increasing to 16 million cubic meters
eight years later. Bolivian gas reserves have been certified in the following
quantities (billions of cubic meters):
19972004
Sao Paulo3,9827,874
Santa Catarina1,5832,076
Rio Grande do Sul
931
1,481
Parana6201,748
Minas Gerais4541,700
Mato Grosso do Sul
430
684
Rio de Janeiro
-
473
BOLIVIAN GAS RESERVES
(billions of cubic meters)
Proven reserves118.5
Probable reserves46.8
Possible reserves135.8
Source: Petrobras
TOTAL301.1
Slow Expansion
Source: Petrobras
Industry in southeastern Brazil considers the additional gas to be
vital. But studies indicate that it would take seven years — as well as an
extension of the pipeline to Rio Grande do Sul — for demand to reach the
optimum level of 16 million cubic meters per day, due to local preference
for other fuels and a lack of distribution facilities.
Over a period of 30 years, the 2,233 km pipeline would utilize 175
billion cubic meters. Reserves are therefore sufficient to also meet Bolivia’s
own estimated demand of 33 billion cubic meters.
The pipeline is to start at Santa Cruz de la Sierra, in Bolivia. From there,
it would extend to the border town of Corumba and then to Campo
Grande, one of the largest and fastestgrowing towns of Mato Grosso
do Sul. It crosses the projected TieteParana waterway, near Presidente
Epitacio, and finally arrives at the industrial towns west of Sao Paulo,
Limeira, Piracicaba, Sorocaba and Campinas. The promise of Bolivian gas
has already raised expectations in those towns. According to preliminary
estimates, the gas would be distributed to the following states in the
following quantities:
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The only way to give the project economic viability from the start, in
an area lacking both habitual gas usage and largescale gas distribution
networks, is to set up a couple of large, gasfired thermoelectric plants or
“thermoelectric anchors,” as they are called. This is the basis of Enron’s
proposal for a large thermoplant in Sao Paulo state.
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Projects Under Consideration
•bidding for Enron’s proposed plant is scheduled for December 1997. The
location and exact size are still not defined, but it would be somewhere in
Sao Paulo state and be 1,500 and 2,000 MW. The Sao Paulo state utilities
are not interested in this plant;
The basic gas market study for Sao Paulo, prepared by the Sociedade
Paulista de Gas (SPG), proposes a 2,000 MW plant in Sao Paulo and a 275
MW plant in Mato Grosso do Sul. Several proposals have been put forth.
•DNAEE has also listed three more plants in the pipeline’s path for bids:
•Enron proposes a 1,600 MW plant somewhere in Sao Paulo, possibly near
Campinas, at a cost of US$1.3 billion. State utility CESP opposes the
Enron proposal.
•Eletrosul has authorization for undertaking feasibility studies for two
gasfueled plants on the path of the pipeline in Mato Grosso do Sul: a 90
MW plant in Campo Grande and a 30 MW plant in Corumba.
Corumba II, 57.9 MW, March 1999
Campo Grande II, 100 MW, September 1999
Campo Grande III, 70 MW, September 2002
Pipeline Obstacles
•Cemat is proposing a 2,000 MW plant on the Bolivian border. It would
then transmit the electricity across to Brazil through lines to Mato Grosso
and Rondonia.
Several fundamental divergences are still blocking the launch of the
pipeline project and the general expansion of gas usage in Brazil.
•Petrobras favors conversion of two oilfueled plants it supplies: Piratininga,
a 470 MW Eletropaulo plant in Sao Paulo, would be converted to gas
and expanded by 7001,170 MW, at an estimated cost of US$800 million;
Carioba, a CPFL 32 MW oilfueled plant in Americana, Sao Paulo, would
be converted to gas and expanded by 340370 MW.
1)Institutional Problems
One crucial problem was solved by the constitutional amendment
allowing private companies to distribute gas. (See Chapter III, “The Legal
Framework for Electricity Privatization.”) The amendment allowing private
companies to participate in the oil sector should be passed by the end of
1995. But the large gas companies that wish to invest in Brazil need more
comprehensive regulations, including clearly defined policy priorities for
the use of gas, and definitions of regulatory agencies and their scope. Some
of the new regulatory framework for gas will depend on laws that haven’t
even been proposed, which will regulate the flexibilization of the state
monopoly on gas and oil. For example, if Petrobras will be the only buyer
The current agenda is:
•conversion/expansion of the Piratininga and Carioba plants;
•two gasfueled thermoelectric plants in Corumba and Campo Grande are
scheduled to be offered for public bidding: Corumba I (57.9 MW) in
October 1995; and Campo Grande (100 MW) in January 1996.
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of Bolivian gas in Brazil, under what terms will it sell the gas to other
enterprises?
3)The tariff problem
The price originally negotiated with the Bolivian authorities was US$0.90
per million BTU at the gas field. Adding US$1.83 transport cost, the
gas would reach the city gates at the price of US$2.73 per million BTU.
Concessionaires resisted, claiming that the ideal price ranges from
US$2.202.30. Later, Bolivian authorities demanded US$1.10 per million
BTU at the gas field. A compromise was agreed to start at a lower level,
around US$0.95, rising gradually to US$1.06. One complication is that
Brazilian authorities want to have the same final price at all city gates along
the pipeline to Rio Grande do Sul. Only by basing charges on distance
could tariffs be reduced in the major market, Sao Paulo. The Sao PauloRio
Grande do Sul section of the pipeline doesn’t make economic sense at
this stage, especially with an equalized gas tariff along the route. This will
raise tariffs for the “paulistas,” in order to cover the costs of transporting
the gas to Rio Grande do Sul, thus narrowing the feasibility margin of the
project even more. Comgas, the Sao Paulo state concessionaire, opposes the
equalized tariff.
Another complication is that the gas business in Brazil has been
controlled by individual states, and the recent flexibilization enabling
private participation did not change that policy. The BoliviaBrazil pipeline
crosses five states, with branch lines to two others, each with its own state
gas concessionaires, each to issue its own regulations for private companies,
each with its own regulatory agency. The legal gap to be covered is huge;
foreign companies are volunteering to help Brazilian authorities shape the
legal framework.
2)Technical problems
The main technical problem is the definition of the thermoelectric anchor
and its operating system. The foreign gas companies want Cesp to build
a 1,600 MW thermoplant and sign a purchase contract for a specific and
steady amount of gas, making the plant the base of the system. Eletrobras’
policy, on the other hand, is for new thermoelectric plants to operate only
during the dry season so that hydroelectrics don’t have to dispose of excess
water during the rainy season. But to operate only during the dry season is
in conflict with the 95% takeorpay clause in the pipeline contract and also
contradicts the aim of the thermoelectric plant to “anchor” the pipeline.
Last but not the least, CESP claims that it is in the process of shedding and
privatizing some of its assets, and that the last thing it wants to do now is
to invest in a thermoelectric plant. Private companies may do it, but CESP
won’t even guarantee to buy the electricity.
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4)The financial bottleneck
With so many unsolved pricing problems, the financial package for the
project is still not available. Brazilian authorities expect foreign companies,
particularly Enron, to provide the package. The World Bank, the InterAmerican Development Bank and the Andean Development Corporation
have expressed interest, but also reservations, particularly over the role of
Petrobras. They would prefer that the pipeline be majority controlled by
private interests. Private bankers say the funding would be less expensive
if Petrobras did not insist on a major role. A related complication is the
politics of privatizing the Bolivian state oil company YPFB. There is
considerable resistance in Bolivia to the YPFB sale. A privatized YPFB is a
requirement of a successful financial package for the pipeline.
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Other Thermoelectric Projects
5)The political problem
Foreign gas companies are investing heavily in an effort to create favorable
political conditions for the pipeline, but they do not seem to have captured
Brazilians’ imaginations the way the car industry did when it launched
the gasohol program in 1974, following the oil crisis. Gasohol was not
economical, but the program was implemented with large subsidies. The
problem with gas is finding interest groups that are powerful enough to
create momentum. Gasohol was supported by three major interest groups:
the car industry, the capitalgoods industry and landowners. The pipeline’s
partisans are more widespread and less focused (with the exception of the
pipe manufacturers), which is why the project lacks sufficient support.
Four thermoelectric plants have been proposed for the Southeast, to
be fueled by high viscosity oils. Three would have 350 MW capacity,
of which two would be near the Paulinia refinery in Campinas and one
would be attached to the Sao Jose dos Campos oil refinery. But there
are environmental and water supply problems to be overcome. Only
the Paulinia I project was listed for public bidding by DNAEE, set for
December 1998. The other plant is Igarape II, a Cemig concession with
125 MW, in Mateus Leme, near Belo Horizonte. In addition, Igarape I
and Santa Cruz (Rio de Janeiro) are being converted from light oil to high
viscosity oil.
The alternative approach would be to offer smaller-scale solutions and
to stress the environmental advantages of using gas. There is a consensus
that the gas is needed, but there is no consensus on the desirability of
large plants or even the use of a large (32”) pipe to feed it. Significantly,
however, the gas idea is beginning to gain support among business
executives and industry in midsized towns in outlying areas. In any case,
initiatives for expanding local gas distribution networks are multiplying.
At some point in the near future, the pipeline will become an irreversible
proposition.
Cemig has signed an agreement with Southern Electric to study setting
up one or more thermoelectric plants fueled by imported coal and totalling
about 2,200 MW, along the BeloHorizonteVitoria railway. The key would
be to use the return idle capacity of the iron ore export corridor, including
the trains, the TubaraoPraia do Mole special harbor, and even part of the
ships. This corridor can transport 6 million tons of coal per year.
The Gaucho Pipeline
Outlook
The Rio Grande do Sul state government is proposing to the Argentine
government that they jointly set up a 415 km, 16” pipeline from Parana,
in Argentina, to Uruguayana, in Rio Grande do Sul, to feed a 300 MW
plant. The cost is estimated at US$90 million.
As of September 1995, the odds are that the pipeline will go ahead, but
not very soon, and only as far as Sao Paulo. The preliminary notice for bids
for the Santa CruzCampinas section, held in December 1994, attracted
170 companies.
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Southern Coal
governments, the Plan 2015 team conducted studies about how to increase
electricity generation using coal. In addition to problems related to high
ash content, Environmental Protection Regulation 08 limits the use of
pulverized coal in plants over 70 MW. Also, mining waste disposal poses
environmental problems. Still, it was decided that new technologies could
improve the prospects of Brazilian coal for electricity production.
Brazil has plentiful coal reserves, but they are poor quality, and most
are located in the extreme south. But the coal is adequate fuel for onsite
thermoelectric plants. There are 32.4 million tons of coal reserves, of
which 10.1 million tons are verified. They are in open and underground
mines, most with about 53% ash content and high sulphur content. About
89% of the reserves are in Rio Grande do Sul. Just over 10% are in Santa
Catarina and only 0.5% in Parana.
Supply Agreement Signed
A protocol was signed between Eletrobras and the coal industry to assure
coal supply for nine power plants near the mining site, at prices compatible
with the marginal cost of the electric sector expansion plan. The nine
units were chosen from several already on the drawing board, totalling
4,630 MW capacity. Reserves and mining capacity were certified to assure
a 30year supply, at 50% capacity. Coal prices were graded according to
quality, ranging from US$7.88 a ton at Candiota III, (quality CE3300),
to US$32.04 per ton at Sapopema (quality CE6000). The proposed
technology is fluidized coldbed. Only one unit was included in the Ten
Year Plan: Candiota III, slated for 350 MW.
RIO GRANDE DO SUL COAL
% humidity
% sulphur
% ashes
Calories/kg
Leao10.91.747.13,742
Irui7.50.549.03,300
Charqueadas
6.70.753.63,100
Candiota
15.21.950.13,200
Source: Petrobras
Following the 1970s oil crisis, coal was used as a substitute for oil
by major industries and also to fuel three new thermoelectric plants.
Production reached a maximum of 8 million tons a year in 198788.
Since then, a coal transport subsidy has been phased out, and industry
consumption has declined significantly. Production is down to only 4.9
million tons a year, 67% to fuel the thermoelectric plants.
Following the authorities’ decision in principle to increase coal usage
in the national energy system, as well as lobbying by the southern state
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The Role Of Thermoelectricity In Plan 2015
Coal-fueled thermoelectric plants on the drawing board
Of the authorizations or concessions in force by January 1995, 12 were
thermoelectric plants with a total capacity of 5,515 MW (not including
plants of less than 10 MW capacity). By contrast, authorized hydroelectric
capacity totalled 18,401 MW. All the thermoelectrics are for public service
and under the regime of “authorization,” which means that only permits,
not concessions, have been extended for their construction. A concession
is a legal contract that can be bought and sold. An authorization is an
administrative act that can be canceled at any moment, even without
giving a reason.
(feasibility studies and coal supply studies completed)
CapacityInvestment
(MW)(US$ millions)
RIO GRANDE SO SUL
Guaiba568132
Sul do Leao9320
Leao II350*152
Canape II4715
Gravatai32080
Three of the thermoelectric plants, each with 350 MW capacity, were
already in advanced stages of construction, and — preferably — will be
completed with private capital participation. They are:
SANTA CATARINA
Fontanella279**30
Diversos/Residues450-
•Jorge Lacerda IV, in Tubarao, Santa Catarina, an Eletrosul authorization;
PARANA
Sapopema25850.3
•Jacui I, in Eldorado do Sul, Rio Grande do Sul, an Eletrosul authorization;
•Candiota III, in Bage, Rio Grande do Sul, a CEEE concession.
TOTAL4,630590.6
*US$72 million already invested
**US$18 million already invested
A fourth plant, 50 MW Maua 5&6 in Manaus, Amazon, is in the early
stages of construction by Eletronorte and will probably be opened to
private participation as well.
Source: Eletrobras
The other eight plants were only granted authorization to conduct
feasibility studies, mostly to expand existing capacity.
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•Igarape II, a 125 MW authorization to CEMIG in 1989, in Minas Gerais;
an extension of Igarape I;
•Piratininga (Eletropaulo), a 700 MW expansion authorization in Sao Paulo;
•Caiari, a 240 MW Eletronorte project in Porto Velho, Rondonia, to be
offered for public bidding in January 1997;
•Maua 5 & 6, a 5O MW Eletronorte authorization in Manaus;
•Maua 7 & 8, a 240 MW Eletronorte project, also in Manaus, to be offered
for public bidding in January 1997;
•Rio Negro, a 1,440 MW Eletronorte authorization in Manaus;
•Carioba, a 125 MW CPFL authorization in Americana, Sao Paulo, on the
path of the pipeline;
•Campo Grande, a 100 MW project on the pipeline’s route in Campo
Grande, Mato Grosso do Sul, to be offered for public bidding in January
1996;
•Corumba, a 57.9 MW project on the pipeline’s route in Corumba, Mato
Grosso do Sul, to be offered for public bidding in October 1995.
The last three listed depend on the construction of the Bolivia-Brazil
pipeline.
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Chapter 9
Self-production and independent production:
A summary of recent and upcoming projects
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Self-production and independent production: A summary of recent and upcoming projects
Summary
probably around 13,000 GWh per year.
With energy shortages perhaps starting in 1997, largescale consumers
have been pushed into investing more heavily in producing their own
electricity. Even secondrate hydroelectric potential, of the kind still widely
available in the Southeast, can provide electricity on a selfproduction basis.
Such production is exempt from the value added tax and at under US$30
per MWh costs about 10% less than that sold under regular industrial
tariffs.
Under pressure from higher tariffs and alarmed by the prospects of
energy shortages, largescale energy consumers and electricityintensive
industries are having to move toward strategies of energy selfsufficiency.
But the new legislation is adverse for self-producers, because it requires
them to bid for every hydroelectric potential above 10 MW, even those
located on their own property. They may have to pay a premium to get the
concession. The government is trying to find legal loopholes to motivate
selfproducers to take over plants whose construction had previously been
halted. But many such plants incurred significant cost overruns and can
only be transferred to private ownership after a substantial writeoff.
There are also many excellent mediumsized sources in Minas Gerais, close
to the big mining companies and steel mills. Some mining companies,
such as Samarco, plan to selfproduce most of their electricity by the year
2000.
The recovery of the steel sector, the first to be privatized under the
national privatization program, added to the push toward selfproduction.
The iron and steel sectors alone use 19 TWh of electric power per year,
followed by the aluminium sector with nearly 15 TWh. Third is the paper
and pulp industry, with 8 TWh. The other large selfproducers are the
chemical and petrochemical industries, and cement. The paper and pulp
industries produce most of their electricity with leftovers from tree cutting.
Petrobras produces energy from gas associated with oil.
Historical And Political Background
Selfproduction of energy has increased steadily in Brazil during the
last 40 years, with the exception of the 198085 period when industry
stagnated. Even so participation of selfproducers in total production
declined from a peak of 11.2% in 1950 to 8.7% in 1960 to only 5% in
1990, equivalent to 10% of industrial energy. However, it is difficult
to measure selfproduction capacity and production of energy in Brazil
because of the large number of scattered units, including those related to
agriculture. According to a special Eletrobras survey of selfproduction
of energy, completed in 1990, total output increased from just over
8,000 GWh in 1980 to nearly 10,500 GWh in 1990. The survey was
considered complete with respect to hydroelectricity, but inadequate in
its measurement of thermoelectric generation. Selfproduction today is
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Legal Considerations
Profile of energy self producers
To influence new legislation for the electricity sector, selfproducers
organized their own lobby under the 41member Associacao Brasileira de
Grandes Consumidores de Energia (Brazilian Association of LargeScale
Energy Consumers, or ABRACE). But the ABRACE lobby usually lost to
building contractors and state concessionaires, because of the close links
between the conservative congressional representatives from the Northeast,
especially Bahia, and building contractors.
% Share
Year
GWh % Growth of Market
1950737.3 - 11.2
1960
1,644.58.49.2
19652,547.2 9.2 10.2
1970
3,429.86.18.7
1975
4,713.06.66.8
19808,023.0 11.2 6.6
1985
8,327.00.85.1
1990
10,448.04.65.0
1995 13,000.0
4.5 (Plan 2015 projection)
The Ministry of Mines and Energy (MME) has an unofficial doctrine
favoring independent production over selfproduction, on the grounds
that whatever hydroelectric potential is currently being offered must be
more profitable than the next batch and should therefore be destined for
public service rather than for private companies. MME also sees a need
for broader legislation that would define private companies’ obligations
(be they selfproducers or independent producers) toward the integrated
use of hydroelectric potential, such as neighboring towns’ water supply,
navigation, irrigation systems, environmental protection and leisure
activities.
Average yearly rate of growth from 1950 to 1990: 6.9%
Source: Eletrobras, Plan 2015
Self production prospects under the 2015 plan (TWh)
Scenarios
2000
2005
2010
2015
Conflicting Goals
I
II
III
IV
13.9
16.3
17.9
23.4
18.2
21.4
24.3
31.8
23.1
28.6
36.5
48.3
28.9
38.3
61.0
83.1
The conflict between selfproducers and independent producers — or
state concessionaires, for that matter — is very basic: Selfproducers
want to build power plants at low cost and buy energy at the lowest
possible tariff, while independent producers want to sell energy at the
highest possible tariff. Typical wouldbe independent producers are
Source: Eletrobras, Plan 2015`
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either to build and run power plants or to take over partially built plants
to generate electric power for their own use. Decree 915 is the only
legislation specifically directed to selfproducers.
building contractors associated with banks and pension funds. Building
contractors, in particular, want power plants to be built at the highest
possible price, not at the minimum. Some building contractors already
hold concessions granted on the eve of the introduction of the new
legislation. If so, they may also wish to “sell” the concession rights to
largescale energy consumers that need to selfproduce. From another
perspective, the more publicservice concessions are won by independent
producers, the higher the average tariff.
Also, to avoid energy shortages before privatization takes off, the
government ordered state concessionaires to seek out private investors
interested in helping them complete major plants on a jointventure basis.
Because the original concessions were granted for public service and some
are nearly over, DNAEE has flexibilized the terms of these concessions,
and extended the terms of the jointventure contracts beyond the duration
originally given to the concessions.
Tariff Questions
Subsequent legislation has been detrimental to the interests of
selfproducers, especially Laws 8987 and 9074, passed by congress in
1995 to regulate Article 175 of the 1988 constitution, which requires
public bidding for concessions for hydroelectric projects, even for
selfproduction. (See Chapter III, “The Legal Framework for Electricity
Sector Privatization.”) Now, selfproducers must bid for every hydroelectric
project, even those located on their own property. They may lose
to a competitor or have to pay a premium to get the concession for
selfproduction. Pure selfproducers are worse off than before in legal terms.
Both selfproducers and independent producers are demanding a
definition of the pricing policy to be adopted by the national transmission
system (SINTREL), to which they need access. So far there are no general
rules for the tariffs to be paid for the use of the transmission grid. (See
Chapter VII, “How The Tariff System Is Structured.”) Both selfproducers
and independent producers are also demanding legislation that will enable
them to get financing more easily.
On the other hand, selfproducers do not need additional government
guarantees for tariffs that would maintain the concession’s economic and
financial stability. They produce mostly for their own consumption and do
not even have to bill, or set a tariff, unless selling excess energy.
However, some of the government power technocracy is now begging
selfproducers to take over more paralyzed plants, for fear of an energy
shortage. The government is also alarmed by the slowness of the
transfer process and the absence of many independent producers in the
privatization process. It is looking for other legal loopholes that might
allow the transfer of a larger number of paralyzed plants and concessions to
selfproducers without public bidding.
Special Legislation
In 1993, then President Itamar Franco, whose political base is in Minas
Gerais, issued Decree 915, which allows the formation of consortia
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Some Winning Bids
concession. It was begun in 1983 and suffered from repeated halts after
US$310 million in investment, eventually needing another US$770
million to be completed. Eletrosul took the initiative of inviting private
groups to participate in completing the plant. The public bidding was
won by a consortium of four selfproducers, with minority participation
by Eletrosul. The group proposed to sell the surplus energy to Eletrosul
for R$15/MWh, well below the bidding announcement’s minimum price
of R$25/MWh. Eletrosul will continue to coordinate and manage the
construction. Each participant will receive electricity in proportion to its
stake in the consortium.
Selfproducers did take over some of the paralyzed power plants offered
to private initiative, going ahead on the basis of Decree 915. Selfproducer
consortia took over the construction of a very large hydroelectric plant
originally destined for public service, 1,450 MW Ita, and a smaller one,
120 MW Igarapava. The concession for the Igarapava power plant was
transferred by a presidential decree, to circumvent the need for public
bidding. A selfproducer consortium also bid for the other large plant
offered, the 1,200 MW Serra da Mesa, but lost to a consortium of
independent producers.
The private members are: Companhia Cimento Itambe, Poliolefinas
SA, Companhia Siderurgica Nacional and Companhia Industrial de
Polipropileno. This group outbid a sixmember consortium led by
Alcoa, which then contested the outcome with Eletrosul. At the time
of the writing of this report, there were unconfirmed reports that the
final decision — which overruled the losers’ appeal — was on President
Cardoso’s desk. Ita is due to come on stream in 1999.
“Partnership contracts” between the original concessionaire and the new
partners are also being used to circumvent the law. The new contracts
are sanctioned by DNAEE, which even grants extensions on the old
concessions. Partnership contracts are the main mechanism for attracting
private consortia to help complete paralyzed plants. The next important
project to go on the block is 1,800 MW Porto Primavera, a Cesp
concession that needs US$1.8 billion to be completed.
Serra da Mesa. This is a strategic project. It is a large plant (1,200 MW)
that creates the world’s largest water reservoir. Furthermore, it is located
on the Tocantins river, in Goias, 230 km south of Brasilia, adding energy
supply to potentially critical areas and also helping control the river. Serra
da Mesa can facilitate the water supply for all the plants planned for the
Tocantins river. It will enable the Tucurui hydroelectric plant to double
its capacity from the present 4,000 MW to 8,000 MW. Furthermore, at
a cost of an estimated US$2 billion, a 1,300 km connection can be made
between the NorthNortheast grid and the SouthSoutheast, by linking Serra
da Mesa (Brasilia) to Tucurui. Some experts say the expansion would also
Transfer Of Power Plants To Consortia
What follows are comments on the most important transfers of paralyzed
power-plant concessions from state concessionaires to joint ventures with
private consortia:
Ita. With 1,450 MW installed capacity, this is the largest power plant
project. It is located on the Uruguay river, on the Santa CatarinaRio
Grande do Sul border. The plant was an Eletrosul publicservice
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reduce pressure on the country’s energy system because of the seasonal
complementarity between the Sao Francisco and Tocantins river basins.
Other Plants On Offer
Serra da Mesa is a Furnas publicservice concession that expires in the
year 2011. Construction has reached an advanced stage, with US$680
million already invested. Another US$890 million is needed. Furnas will
continue to run Serra da Mesa, but as a joint venture with a consortium
of independent producers formed by Nacional Energetica (Banco
Nacional) and Energisa, which is part of the CataguazesLeopoldina group,
a longstanding independent producer and distributor of energy. The
consortium will have the right to 51.54% of the generated energy. Under
the contract with Furnas, the consortium will install its first turbine in
April 1998 and the others in December 1998. The BNDES is to grant
up to 75% of the financing needed to complete Serra da Mesa. The
government has agreed that the contract between the consortium and
Furnas will be maintained by any other company that may win the
concession if it is not renewed with Furnas in 2011.
The same jointventure system will be extended to other unfinished
plants originally destined for public service, including three thermoelectric
concessions. The problem with most of these plants, especially the Cesp
concessions and the Candiota II thermoelectric plant, is that they incurred
tremendous cost overruns during construction. A plan to write off part
of the book value must be designed to make them attractive to private
initiative, even to selfproducers. The most important plants to be offered
are:
Porto Primavera, a 1,814 MW hydroelectric plant concessioned to
Sao Paulo’s Cesp. Located on the Parana river, it is well advanced and
is scheduled to start generating electricity in 1998. The concession is
for public service and runs till 2008. Cesp and DNAEE already have
an agreement to extend the concession term. The plant needs another
US$1.6 billion to be completed. It has already cost about twice its book
value. The Sao Paulo government urgently needs cash to complete the
project. The package being designed is in the form of a partnership
between Cesp and a consortium of independent producers or selfproducers
that will be guaranteed certain sales volumes;
Igarapava. This is a 210 MW plant on the Rio Grande river, on the
border of Sao Paulo and Minas Gerais. It uses new turbine technology that
reduces cost and environmental damage. Igarapava is a Cemig concession.
It needs an investment of US$290 million and is to be completed in 1998.
It was transferred to a sevenmember consortium, mostly selfproducers:
Companhia Vale do Rio Doce, Mineracao Morro Velho, CSN, Companhia
Mineradora de Metais and Eletrosilex. Cemig has kept a 14.5% share.
The Minas Gerais state government wants to extend the Igarapava
transfer model, by which the state concessionaire keeps a share in the new
consortium, to other Cemig concessions.
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Canoas III, two hydropower projects, also Cesp concessions, located
on the Paranapanema river. Total capacity is 155 MW. They could begin
generating energy in 1997. The two plants have already received US$317
million in investment, but another US$340 million is needed. However,
the two plants are worth only US$320 million. The concession is for
public service and expires in 1997. This means that the contract will have
to guarantee a new 30year concession;
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Miranda, a 390 MW Cemig concession on the Araguari river, halfway
to completion. Total cost is estimated at US$540 million. It is a Cemig
priority to complete the plant, which is due to start generating energy by
1997. Work on the plant is going ahead;
Jacua, a 350 MW Eletrosul thermoelectric concession in Eldorado do
Sul, Rio Grande do Sul, that needs US$290 million to be completed;
(For more information on thermoelectric generation, see Chapter VIII,
“The Themoelectric Option”.)
Manso, a 210 MW Eletronorte publicservice concession on the Manso
river. It needs US$240 million (out of a total US$380 million investment)
to be completed; part of it is already in operation;
Concession Confusion
Samuel, a 217 MW Eletronorte publicservice concession on the Jamari
river. It needs US$60 million for installation of the turbines;
DNAEE has 97 applications for concessions for selfproduction of energy,
totalling 6,165 MW installed capacity. The applications were filed before
the new legislation requiring competitive bidding was passed. At this
stage, it is unclear whether the new legislation will apply.
Cubatao, a 45 MW Celesc publicservice concession on the Cubatao
river, near Joinville, which is Santa Catarina state’s largest industrial area.
An equally important goal of the project is to control the river so as to end
the repeated flooding of Joinville. The project needs US$50 million to be
completed in about three and a half years. The decision to maintain it as
a publicservice concession was opposed by most participants in a public
hearing held by Celesc to publicize its partnership intentions. Celesc may
ask DNAEE to make Cubatao a “mixedused” concession, combining rules
for public service and selfproduction;
If DNAEE only grants an authorization to undertake feasibility studies,
a public bid might be necessary to transform the project into a proper
concession in order to comply with the new legislation. As noted earlier,
an “authorization” is an administrative act that is not legally binding.
During the process of being transformed to a concession, the concession
itself might even be redefined, from selfproduction to public service. The
possibility of such revisions is making selfproducers furious.
Candiota III, a 350 MW thermoelectric CEEE concession at the
Candiota complex, in Bage, Rio Grande do Sul. The original 2,000 MW
project was scaled down to a 350 MW extension to Candiota II. The
project’s main problem is the need for financial reorganization to deal with
an outstanding US$522 million debt to French banks and equipment
suppliers;
Each part of the process must be conducted strictly according to the
new law; otherwise, concessionaires could find themselves facing costly
legal battles. For example, the basis for appropriating land to carry out
the concession is rooted in the law. In the absence of legal protection,
concessionaires could become victims of landowners anxious to thwart
them, or to blackmail them into paying outrageous prices.
Maua 5 & 6, a 50 MW Eletronorte thermoelectric concession in
Manaus, Amazon, needing US$100 million for completion;
Most concessions or authorizations range from 50 MW to 120 MW, but
there are several much larger ones. Nearly half — 42 concessions — are
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located in Minas Gerais. Mato Grosso comes second with 13 concessions.
The complete list is in Annex I.
Funil Grande. A 180 MW project on the Rio Grande river in Minas Gerais.
The investment is US$ 180 million and it is a joint concession between
Minas Ligas and Andrade Gutierrez, to be completed by 1997;
Self-Producer Projects
Pilar. A 150 MW concession by Fiat Energia, on the Piranga river in Minas
Gerais, to be completed by 1997;
Porto Estrela. A 112 MW concession on the Santo Antonio river in Minas
Gerais, to building contractor Mendes Junior, which also owns the Mendes
Junior steel mill:
The Eletrobras coordinating group for planning the expansion of the
electricity system (GCPS) has estimated that up to 30 selfproducer projects
will be included in the tenyear plan running from 19952004.
DNAEE has divided its register into three categories:
•34 power-plant concessions with projects already approved or under final
revision, totalling 2,416 MW installed capacity;
Sa Carvalho. A concession to steel mill Acesita for exclusive use, with 48
MW, at the Piracicaba river in Minas Gerais, to start operations in 1998;
Queimado. A 110 MW concession on the Preto river in Minas Gerais, to
the EPP group;
•31 applications granted authorization for feasibility studies, totalling 1,473
MW installed capacity;
Sobagi. An 80 MW project on the Paraibuna river in Minas Gerais, granted
to the CPM contracting group;
•32 applications still waiting for DNAEE’s authorization to conduct
feasibility studies.
Picada. A 50 MW concession on the Peixe river in Minas Gerais, also
granted to the CPM group;
What follows are comments on some of the main selfproducer projects
listed in Annex I, with respect to size or stage of implementation:
GuilmanAmorim. A 140 MW project still to be started on the Piracicaba
river, in Minas Gerais. One of the last concessions for exclusive use, it
was granted before the new concessions law took effect. It was granted to
a consortium of two selfproducers: Belgo Mineira (steel mill) and Caue
(cement). They will invest US$130 million to have the plant ready to
supply by 1997;
New Concessions
During the period from 19952004, 72 power-plant concessions will
be offered for public bidding. Each public bidding announcement will
specify whether the concession is being offered for selfproduction or public
service. Criteria will differ.
MunizFreire. A 25 MW plant concession on the Pardo river in Espirito
Santo, granted to Samarco Mineracao, that will be completed in 1997;
A first round comprising seven plants is scheduled for the end of 1995
and/early 1996. About half of the plants were concessions held by state
utilities but never implemented and later canceled by the president in
Bau. An 80 MW power plant on the Piranga river in Minas Gerais, also
granted to Samarco Mineracao (mining);
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March 1995. They are included in the estimate from Eletrobras’ GCPS
planning group, in accordance with demand projections of Plan 2015.
450 MW and it is still in project stage. Estimated cost is US$600 million;
Serra Quebrada, a 1,328 MW hydroelectric potential on the Tocantins river.
The concession was formerly held by Eletronorte. It is still in project stage
and needs US$1.5 billion in investment;
There are also 10 thermoelectric plant concessions, including six to be
fueled by the BolivianBrazil pipeline, that are in a very preliminary study
stage. (See Chapter VIII, “The Thermoelectricity Option.”) The list of
plants will be reviewed by the GCPS every five years. A complete list of
the concessions and provisional bidding dates is in Annex II. About six
concessions per year will be offered for public bidding, starting in 1995.
Thermoelectric concessions to be offered for public bidding are:
Corumba I & II, located in Mato Grosso do Sul on the Bolivian border, in
the first Brazilian town to be reached by the pipeline; two units with 57.9
MW capacity each;
The most important new hydroelectric concessions to be offered for
public bidding within the next two years are:
Campo Grande I, II & III, also on the pipeline’s path. The first two units
have 100 MW each, and the third has 70 MW. Bidding will be held in
three-year intervals, beginning in 1996;
Sapucaia/Anta, with joint potential of 316 MW. The former Furnas
concession is on the Paraiba do Sul river on the Rio de Janeiro/Minas
Gerais border. Still in the project stage, it is estimated to need investments
of US$470 million;
Maua 7 & 8, a 260 MW project in Manaus, Amazon. It was formerly an
Eletronorte feasibility study authorization;
Campos Novos, a 880 MW potential on the Uruguay river in Canoas, Santa
Catarina. It is still in the project stage, with an estimated cost of US$620
million. Celesc, which formerly held the concession, will try to join any
consortium that wins the bidding;
Caiari, a 240 MW plant in Porto Velho, Rondonia, formerly a Eletrobras
1440 MW feasibility study authorization;
Simplicio, a former Furnas concession on the Paraiba do Sul river, with
180 MW capacity. It is in the project stage and estimated to cost US$390
million;
Sao Paulo/Unnamed, a 1,600 MW plant to be fueled by Bolivian gas, still
unnamed and without a definite location. It will probably be set up in
Campinas. This may be a US$1.6 billion Enron project. The bidding date
is set for December 1997;
Aparecida 8 & 9, a 100 MW concession for Manaus, Amazon;
Irape, a 420 MW potential on the Jequitinhonha river, in Minas Gerais.
It is a former Cemig concession in the project stage, estimated to cost
US$500 million;
Replan I, a 350 MW project with no definite location yet. Petrobras
may designate Replan I as one of the thermoelectric plants that will use
high-viscosity residues from its oil refineries in Sao Jose dos Campos and
Cana Brava, on the Tocantins river. Formerly held by Furnas, its potential is
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Campinas, Sao Paulo. Petrobras developed plans for three such units
(two in Campinas and one in Sao Jose), but they faced technical problems
related to water supply.
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Chapter 10
A profile of the major electric utilities
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Summary
the recently privatized Escelsa, but all of them are in the distribution
business. The current balance of market share suggests that even following
a substantial degree of privatization, the state power technocracy will
remain strong.
Brazil’s electric utilities are enormous by any scale. The federally owned
utilities and some of the largest state-owned ones have gradually become
dysfunctional due to construction delays, cost overruns, politically
motivated overstaffing, low tariffs and lack of competition. High loss rates
are also a problem. As a whole, the sector has a low rate of return, low
liquidity and high indebtedness. Still, several state-owned utilities are well
managed and are rapidly improving their profitability after the national
equalized tariff was discontinued in 1993. But even the best managed
state-owned utilities, such as Cemig and Copel, need an injection of
private capital to accelerate their investments.
The Ownership Network
Half of the country’s 20 largest companies are electric utilities, including
the second-, third- and fourth-largest. The government ownership system
operates in two tiers: At the top is the federal holding company Eletrobras,
under the authority of the Mining and Energy Ministry (MME), which
coordinates the entire system and controls — via subsidiaries — 64% of
Brazil’s generating capacity and 32% of transmission lines. In the second
tier are the power companies owned by each of the states, often with a
degree of Eletrobras shareholding. In this report, to avoid confusion we
often refer to Eletrobras-controlled companies as “federal utilities” and
state-owned companies simply as “state utilities.”
State-owned companies control the remaining 36% of generating
capacity, 68% of transmission lines and 92% of the distribution grid.
Municipal authorities and private companies control the remaining share
of the distribution grid. There are now 24 private companies, including
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The 20 largest state-owned utilities
State
Company
Ownership
Net
Net
Sales
Assets
(US$ millions)
1 ELETROPAULO
Sao Paulo
2 FURNAS
Eletrobras
3 CESP
Sao Paulo
4 CEMIG
Minas Gerais
5 LIGHT
Eletrobras
6 CPFL
Sao Paulo
7 EEE
Rio Grande do Sul
8 COPEL
Parana
9 ELETROSUL
Eletrobras
10 CHESF
Eletrobras
11 CELESC
Santa Catarina
12 ELETRONORTE
Eletrobras
13 COELBA
Bahia
14 CERJ
Rio de Janeiro
15 CELPE
Pernambuco
16 CELG
Goias
17 COLCE
Ceara
18 CEB
Brasilia
19 ENERSUL
Mato Grosso do Sul
20 CEMAT
Mato Grosso
2,587
2,095
2,106
1,184
925
806
615
615
590
524
376
371
347
292
271
215
192
156
117
113
*Shares are publicly traded.
Sources: Getulio Vargas Foundation; Melhores & Maiores.
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6,717.8
13,476.2
11,742.5
7,112.9
6,532.5
2,265.3
3,262.8
4,013.2
5,569.3
14,107.3
1,289.1
16,927.7
983.8
175.8
585.3
1,200.9
371.3
422.0
450.4
307.2
Market
Share
(%)
*18.5
13.0
*12.5
*8.6
*6.8
*5.7
*4.9
*4.9
4.6
*4.2
2.8
2.5
*2.4
*1.9
1.7
*1.5
1.4
1.0
0.8
0.8
Bernardo Kucinski
The generation business is very concentrated. Five companies control
95% of capacity. They are Eletrobras and its subsidiaries with nearly
40% of the market, Itaipu with 24%, CESP with 18%, Cemig with 9%
and Copel with 5%. Distribution, on the other hand, is spread among
a large number of companies. The largest are Eletropaulo with 22% and
Cemig with 13%. Light, soon to be privatized, has 9% of the distribution
market.
The Eletrobras System
About 56% of the distribution market is spread among 30 companies.
But in Sao Paulo state three utilities alone control 32% of the national
distribution market. Besides Eletropaulo (22%), CPFL has another 6%
and Cesp has 4%. This explains why the outcome of the splitting of the
supply system into generation, transmission and distribution will be largely
determined by the Sao Paulo state authorities.
Eletrobras functions simultaneously as a holding company for the federal
electricity system and as the top federal agency for electric energy planning,
financing, coordination, and supervision. It also controls the transmission
systems. As a holding company, it has four regional subsidiaries, plus a
50% share of Itaipu Binacional, 75% of Nuclen (the country’s nuclear
engineering company), a majority stake in Light, minority participation
in 26 state concessionaires, and a 15% share of recently privatized
Escelsa. Planning, construction and operation of specific concessions and
projects are carried out directly by the regional subsidiaries. Altogether,
the Eletrobras system comprises 68 power plants, accounting for 54% of
national generating capacity, 32% of transmission lines and 4% of the
distribution grid.
Eletrobras (Centrais Eletricas Brasileiras SA) was created in 1961 by Law
3890 to promote the recovery of the power system after a long period
without investments. Today it has more assets than any other Brazilian
company: net assets are US$62.6 billion and total assets are US$76.5
billion. (Figures are from December 1994).
STATE POWER SECTOR RATIOS
Best Margins
CEMIG 9.9
CELESC 3.8
CELG 3.4
CESP
3.4
COPEL 2.8
Liquidity
CELESC
CELPE
LIGHT
ENERSUL
COPEL
1.86
1.21
1.13
0.53
0.60
Indebtedness
CELESC
LIGHT
15.9
16.8
ELETRONORTE18.5
ELETROSUL20.7
COPEL 24.1
Growth
Eletrobras has significantly improved its financial situation since the
1993 financial reorganization of the power sector. Its net sales went up
from US$5.2 billion in 1993 to US$5.7 billion in 1994, and its return on
capital increased from 1.1% to 2.9%. During the first half of 1995, net
profits were three times that of the same period in 1994.
ENERSUL42.3
EEE
40.1
COPEL
31.4
CPFL
13.0
CEMAT 12.6
Source: Maiores & Melhores, 1994. Margins are on total investments (%); liquidity is the
ratio between total assets and receivables over total liabilities; indebtedness measures total debt
over assets.
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systems. Chesf has 9,900 employees and one of the lowest rates of net sales
per employee (US$50,000).
SISTEMA ELETROBRAS
Controlling
Share
Region
(%)
ELETRONORTE
CHESF
FURNAS
ELETROSUL
LIGHT
NUCLEN
98.82
99.52
99.54
99.71
81.61
75.00
In 1994, using approximately US$500 million in credits from the
settlements of the national tariff equalizing account (CRC), Chesf
renegotiated its federally guaranteed debts and also rescheduled some
US$2.5 billion worth of debts to Eletrobras. Chesf ’s 1994 losses reached
US$197 million. Its net assets are estimated at US$14 billion, or US$300
per share. Chesf is still to receive an estimated US$145 million in credits
from five state concessionaires that are its major clients. The Ceara state
concessionary alone (Ceal) owes Chesf more than US$60 million for
supplying power. The Bahia state concessionaire (COELBA), which
takes more than 28% of all Chesf ’s energy, owes it nearly US$10 million.
However, Chesf lost a US$1.9 billion lawsuit brought against it by
construction firm Mendes Junior because of delayed payments. Chesf still
refuses to pay, even after the judge’s order.
CapacityInvestment
MW
(US$ bn)
North/C. West
5,274
Northeast
7,704
Southeast/C. West 8,132
South
3,602
Southeast
15.511
13.423
12.497
5.694
5.113
ELETROBRAS FINANCIAL RETURN STATEMENT, 1994
(in US$ billions)
Current assets9.083Current liabilities3.807
Noncurrent assets
14.899
Noncurrent liabilities
12.503
Investments53.865Equity61.537
Total77.847
77.847
Net sales
Net Profit
Return on investment
5.693
1.79
2.9%
Chesf ’s main operational obstacles for years to come will be the shortage
of transmission lines. (It has some 15,630 KM of medium- and highvoltage lines and 12,263 MVA transforming capacity.) In December 1994,
the company forecast that demand in its area would grow by 5.5% per year
until 2003, when it would reach 60.1 million MWh per year — a quantity
that Xingo will be able to supply with its six generators. But construction
of Xingo has absorbed all Chesf ’s resources, and now the company needs
an estimated US$250 million to build several lines to bring Xingo’s energy
to Recife, Bahia, Alagoas and Fortaleza. A second stage will require an
additional US$240 million to set up 665 km of transmission lines, as well
as substations, to handle an additional 1,800 MW of Xingo’s 3,000 MW
installed capacity.
(1993 = 5.202)
(1993 = 654)
(1993 = 1.1%)
Source: Smith New Court calculations, corrected for the Escelsa privatization; DataFolha.
ELETROBRAS GENERATORS
Chesf (Centrais Eletricas do Rio Sao Francisco)
Chesf operates 16 hydroelectric plants with 7,271 MW capacity, and 20
small thermoelectric plants with 432 MW, totalling 7,704 MW altogether.
Its operating system, covering the entire Northeast, is divided into four
subsystems, all interconnected. Two are also connected to Eletronorte’s
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Rio Grande do Sul. It generates 40% of the power it sells and takes the
rest from Itaipu Binacional, through Furnas. But Eletrosul also supplies
Furnas with 40% of its own generating capacity. The interchange is due to
the alternation between rainy seasons in the South and the Southeast. The
company has 3,602 MW installed capacity, 8,197 km of transmission lines
and 13,777 MVA transforming capacity.
Chesf ’s generating capacity is also limited by hydrological conditions in
the Southeast. Under very adverse conditions, the company might have
to ration secondary energy to eletrointensive industries. Solutions include
setting up standby thermoelectric plants or buying from Eletronorte, but at
a higher tariff in order to cover transmission costs.
Eletrosul made considerable progress in 1994, trebling its profits to
US$16.4 million, cutting operating costs by about 9% and paying some
of its outstanding debts. But it still has a high proportion of short-term
debts.
Eletronorte
Eletronorte operates the Tucurui system, plus a few other isolated
systems. Tucurui supplies part of the states of Para and Maranhao,
including the capital cities of Belem and Sao Luiz. The system is
connected to Chesf ’s Northeast grid by a 500 KV line. The isolated
systems supply the state capitals Rio Branco, Manaus, Macapa, Porto Velho
and Boa Vista. Overall, it has 5,374 MW installed capacity, 5,848 km of
transmission lines and 13,701 MVA transforming capacity. In nearly all
systems, local distribution is handled by state concessionaires.
Eletrosul may seek private partners to develop two hydroelectric
concessions that have long been forgotten: Machadinho, on the river
Marcelino Ramos, with 1,200 MW and an estimated cost of US$750
million, and the 1,170 MW Capanema on the Iguacu river, which was
never formally studied. The company recently succeeded in getting a
consortium to complete its Ita hydroelectric plant. It is also trying to
put together a consortium to complete the 350 MW Jacui thermoelectric
plant, for which an additional US$245 million is needed to complete it by
1997.
Eletronorte has staged a partial financial recovery. It used most of its
US$500 million in receivables from the RCR to pay debts. Its net assets
total US$16.9 billion, or US$230 per share. One of its major projects is
setting up of a second high-voltage transmission line from Tucurui to Vila
do Conde, to supply the Alunorte/Albras aluminium complex and the city
of Belem, at a cost of US$100 million.
Furnas
Furnas operates at the core of the Southeast/CentralWest system,
transporting Itaipu’s energy and maintaining supply contracts with all
major concessionaires of the major consuming states. It has 8,123 MW
installed capacity, not counting the Brazilian half of Itaipu, 15,213 km
of transmission lines and more than 60,000 MVA transforming capacity.
Eletrosul
Eletrosul supplies nearly half of all the electric energy distributed by the
state concessionaires of the southern states of Parana, Santa Catarina and
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Furnas became a lame duck because it was designated to take over the
money-losing nuclear plant Angra I and because of the gross cost overruns
of Itaipu.
gains from the fall of the dollar against the real, because it buys 33% of
its energy from Itaipu, whose sales are pegged to the dollar. The BNDES
has mentioned US$2 billion as Light Operational’s probable value. First
Boston estimates that Light Operational is worth up to US$4.4 billion.
Its net assets book value, with Eletropaulo, is US$8.6 billion. Even if the
government only auctions a majority stake and not the entire number of
shares, the deal will be worth more than US$1.5 billion.
The Privatization Of Light
This is the next major utility set to be privatized after Escelsa, the
Espirito Santo state utility. Rio de Janeiro state company Light is the
fifth-largest Brazilian company in terms of sales, with more than US$1.8
billion gross sales a year, and more than US$920 million net sales. It
supplies 10 million customers, or nearly 70% of the Rio de Janeiro area.
Its privatization poses considerable problems, which are currently being
tackled by Trevisan Consultores, a consulting group commissioned by the
BNDES (National Development Bank).
Light’s main operational problems are the deteriorated state of its
distribution grid, its high investment needs, and its high loss rate, which is
due to lack of meters and to many illegal connections, reaching 17.4% of
total supply.
The Sao Paulo State Concessionaires
Cesp
Light is estimated to be worth US$4.5 billion, but this includes a
47.52% share held by Eletropaulo, which is controlled by the bankrupt
state of Sao Paulo. To overcome the problem of Eletropaulo participation,
Light will be divided up, and only its Rio de Janeiro section — probably
to be called Light Operational — will be privatized. Light’s stake in
Eletropaulo will be put under the umbrella of a new company called Light
Participacoes. Light is also owed US$1.1 billion from an Eletropaulo
debenture issue, which has yet to be settled.
This is the third-largest Brazilian company by sales and one of the most
overstaffed. Its US$360 million in profits in 1994 was largely fictional,
due to the offsetting of exchange differences in Cesp’s foreign debt. The
company was heading toward a US$600 million loss in 1995, according
to estimates early in the year. It had 19,592 employees in December 1994
and US$8.5 billion in debt. Since then, nearly 5,600 employees have been
laid off or accepted a voluntary leave agreement. Cesp is trying to reduce
its debt burden by issuing floating notes in the international market at
interest rates much lower than domestic ones. Operational costs have been
cut by US$750 million. But Cesp needs to cut another US$1 billion in
costs to achieve general stability.
Light has had satisfactory returns, though often offset by losses incurred
by Eletropaulo. During the first half of 1995, it incurred losses of US$27
million because of Eletropaulo’s negative performance; without Eletropaulo
it would have had profits amounting to US$60 million. In 1994, Light’s
average tariff went up from US$49/MWh to US$60/MWh. It also made
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during fiscal year 1996. Eletropaulo owns many properties that are now
being examined for future sale.
Cesp has decided to halt investment in generation, and it has canceled
studies on a number of small plants. These concessions were already
canceled by DNAEE and will be offered at public auction. To complete
Canoas III, it will seek partnership with private capital. The Canoas
complex needs only US$140 million to be completed. Preparation of the
auction notice is underway.
CPFL
The company, which serves mostly outlying areas, is being restructured
into three business units, each devoted to one large region. About 20% of
CPFL customers are large-scale consumers that will be able to buy energy
from other concessionaires, including Cemig, at a lower price. CPFL is
trying to reduce its number of employees, but with marginal results so
far. It projects US$380 million in losses in fiscal year 1995. Its debts total
US$5.6 billion.
Eletropaulo
Eletropaulo is Brazil’s largest electricity utility in terms of sales, with
more than US$5 billion gross sales per year and nearly US$2.6 billion in
net sales. It is almost exclusively an electricity distributor. For this reason,
its net assets are relatively smaller, totalling US$ 6.7 billion. With 21,454
employees, it is the largest payer of valued added tax in the state.
Cerj
Its finances are severely out of balance. The company lost US$860
million in 1993 and US$470 million in 1994, according to government
accounting. During the first half of 1995, its losses totalled US$250
million. Its total debt is US$5 billion.
The Companhia Eletrica do Rio de Janeiro is basically an electricity
distributor. It buys 69% of its energy from Furnas and another 28% from
Itaipu. Only 3% comes from its own generators. It serves about 5 million
customers, including the major towns of Niteroi and Sao Goncalo, and
the Paraiba valley area, which is developing as a new industrial district.
Cerj has net assets of US$175.8 million and estimated credits of US$
165 million with Eletrobras’ CRC. In 1994 its sales totalled US$386
million, but with US$120 million in losses. Besides a tradition of bad
management, Cerj’s major problems are overstaffing and a high energy
loss rate. The company’s 5,700 employees can immediately be trimmed
to 4,200. The energy loss, mostly due to lack of meters and regulation,
reaches 25% of total supply, in contrast to the national average of 10%.
The lower 1994 loss was exclusively due to the fall in inflationary losses
as the currency stabilized; operating costs continued to grow, from US$2.8
billion in 1993 to US$ 3.8 billion in 1994, largely due to the higher cost
of electricity as a result of the new tariff policy. (Eletropaulo buys up to
95% of the electricity that it distributes.) It is not operating its Cubatao
hydroelectric plant because of environmental restrictions.
To control ballooning costs, Eletropaulo has laid off nearly 500
employees. But it must cut US$1.5 billion in operating costs to reach
stability. Company officials say they believe they can cut half the amount
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became a profitable company, with the second-highest rate of return for
power utilities in the country (4%). It now plans to significantly expand
its generating capacity. Ita will generate energy at very low cost — only
about US$18 per MWh. Campos Novos, with 880 MW, will cost
US$650 million. Celesc may be able to generate more than 4,000 TWh of
electricity by the year 2000, making it the state’s largest company.
Nonpayment of electricity bills amounts to 25% of total billing.
CEMIG
Cemig is one of the best-managed electricity utilities. It handles 17%
of the Southeast market. Its main problems are a large concentration of
large-scale consumers who pay low tariffs, and the fast pace of economic
development in Minas Gerais, which necessitates rapid expansion in
generating capacity. Industry takes 67% of Cemig’s energy.
The company’s main emphasis is on increasing generating capacity, but
it is also expanding its grid significantly. It plans to invest US$3 billion
by the year 2000, of which US$1.3 billion will be allotted to generation,
US$580 million to transmission and the rest to distribution. Cemig’s
1994 profits were US$701 million. It completed the 510 MW Nova
Ponta hydroelectric plant in 1994, and its new Miranda hydroelectric
plant, with 390 MW installed capacity, will start generating in 1997. To
complete the Igarapava plant, Cemig entered into a partnership with a
private consortium. This is the model it wants to promote for other plants.
Celesc
Santa Catarina’s electric utility is seeking a private partnership to
complete four hydroelectric plants in addition to Ita, which has already
been taken over by a consortium. But there are no plans to privatize the
company outright. Celesc suffered regular losses until 1994, when it
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Charts
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Brazilian States
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Power System
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Path of the proposed Bolivian-Brazilian gas pipeline
Editoria de Arte/ Gazeta Mercantil
Fonte: Agência de Desenvolvimento Tiête-Paraná
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ANNEX I
CONCESSIONS FOR EXCLUSIVE USE HYDROELECTRIC PLANTS
UNDER CONSIDERATION AT DNAEE
ABOVE 10 MW
December 1994
A- Hydroelectric projects for exclusive use already approved by the DNAEE, but not yet under construction.
B- Hydroelectric projects for exclusive use authorized to undertake feasibility studies;
C- Applications for exclusive use hydroelectric plants not yet granted authorization for project studies;
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A- Hydroelectric projects for exclusive use already approved by the DNAEE, but not yet under construction;
Name OwnerRiver(MW)MunicipalityState
GATOS I CARAIBA METAIS
Formoso20.00BA
GATOS III CARAIBA METAIS
Formoso15.00BA
MUNIZ FREIRE I SAMARCO
Pardo14.00Muniz FreireES
CAMPINHOCPM
Jucu - Braço Norte46.80Domingos Martins
ES
GUILMAN - AMORIM
BELGO / CAUE Piracicaba
140.00
Antõnio Dias
MG
ALMAS ITALMAGNESIO
Sono21.00João PinheiroMG
GRACAS ITALMAGNESIO
AGUA BRANCA ITALMAGNESIO
PICADA CPM
Peixe50.00Simão PereiraMG
SOBRAGI CPM
Paraibuna80.00Juiz de ForaMG
CANDONGA EPP
Doce103.00Rio DoceMG
QUARTEL MENDES JUNIOR
Paraúna123.00GouvêiaMG
RODEADO RIMA
Pardo Grande55.00Augusto LimaMG
JEQUITAI II CODEVASF
Jequitai12.00JequitaiMG
PILAR I FIAT ENERGIA
Piranga170.00Ponte NovaMG
PORTO ESTRELA MENDES JUNIOR
Santo Antônio112.00JoanésiaMG
TRAIRA MENDES JUNIOR
Suaçui Grande90.00PeçanhaMG
FUNIL MINAS LIGAS/RIO NOVO
Grande164.00LavrasMG
JUBINHA I ITAMARATI NORTE S.A.
Jubinha11.00Barra do BugresMT
JAURU CINCO ESTRELAS
Jauru70.00JaurúMT
ITIQUIRA I TRIUNFO AGROPECUÁRIA Itiquira61.20ItiquiraMT
JUBINHA II ITAMARATI NORTE S.A. Jubinha16.00Barra do BugresMT
ITIQUIRA II TRIUNFO AGROPECUÁRIA Itiquira94.80ItiquiraMT
SANTO ANTONIO CIA. DO JARI Jari100.00AlemirimPA
ITAPEUARA CAEMI Jari360.00AlmerimPA
FREGUESIA PISA Ribeira do Iguape60.00Cerro AzulPR
PACA GRANDE
TE EMPREENDIMENTOS
Paca Grande
70.00
Angra dos Reis
RJ
FAZENDA DA BARRA INGÁ Grande31.00Bom JardimRJ
BOM RETIRO MOINHO ESTRELA Taquari23.50Cruzeiro do SulRS
PIRAJU CBA Paranapanema70.00PirajuSP
TIJUCO ALTO CBA Ribeira do Iguape144.00RibeiraSP
TOTAL: 2,416.70
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B- Hydroelectric projects for exclusive use authorized to undertake feasibility studies;
NameRiver
(MW)MunicipalityState
ROQUE DE SOUZA PENNAFORT
Cricou 30.00
Oiapoque
AP
SANTA LUZIAGrande
32.00São DesidérioBA
JATOBAGrande18.00São DesidérioBA
ITUMIRIMCorrentes50.00AporéGO
BONFANTEParaibuna20.10ChiadorMG
QUEIMADOPreto111.00UnaiMG
BARRA DO BRAUNAPomba48.00RecreioMG
MONTE SERRATParaibuna22.00ChiadorMG
RETIROParaopeba110.00PompeuMG
BAÚ IPiranga64.73Santa Cruz do Escalvado
MG
TRAVESSÃOManhuaçu113.00AimorésMG
FUNILGuanhães34.00Dores do Guanhães
MG
CACHOEIRÃOManhuaçu61.00AlvarengaMG
MANHUAÇUManhuaçu110.00IpanemaMG
MUCURIMucuri43.00PavãoMG
TABOCACorrentes57.00Pedro GomesMS
ÁGUA ENTERRADACorrentes39.00Pedro GomesMS
PONTE DE PEDRACorrentes188.00Pedro GomesMS
TENENTE AMARAL Tenete Amaral 20.00JaciaraMT
SALTO DAS NUVENS
Sepotuba
30.00
Tangara da Serra
MT
BURITYBuriti15.80Campo Novo do Parecis
MT
SÃO JOÃOSão João18.00PrudentópolisPR
QUARTELAlapó28.00CastroPR
SANTA ROSA IIGrande34.00CordeiroRJ
MONJOLINHOPasso Fundo72.00São ValentimRS
DON MARCOJacuí18.50Rio PardoRS
AMARÓPOLISJacuí12.50General CamaraRS
QUIRIRIQuiriri12.00JoinvileSC
BRUACABruaca12.00CurupáSC
CAPIVARICapivari25.00São MartinhoSC
CAMBURUCamburu25.00CaraguatatubaSP
TOTAL:1,473.63
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C- Applications for exclusive use hydroelectric plants not yet granted authorization for project studies:
NameRiver
(MW)MunicipalityState
BENEVENTEBenevente
16.00Alfredo ChavesES
PORTEIRA IIMaranhão
120.00Barro AltoGO
BURITIS QUEIMADOS
Almas 130.00
São Luiz do Norte
GO
PASSA NOVEMaranhão
150.00Barro AltoGO
BÁLSAMOCorrente
57.00AporéGO
MARANHÃOMaranhão
116.00Assunção de GoiásGO
PARAÍSO São Marcos
41.00CatalãoGO
SÃO MIGUELGrande60.50ItutingaMG
CORRENTE GRANDE Corrente Grande 36.00AçucenaMG
FORTUNACorrente Grande20.00GuanhãesMG
BARRA DA PACIÈNCIA Corrente Grande 25.00AçucenaMG
BAGUARIDoce169.00AçucenaMG
UNAÍPreto25.00UnaiMG
ILHA GRANDEPiranga101.00Ponte NovaMG
DORES DE GUANHÃES
Guanhães
23.00
Dores do Guanhães
MG
PARAÚNAParaúna30.00GouvéaMG
NAQUEDoce123.00Belo OrienteMG
AIRUOCAAiruoca20.00AiruocaMG
MURTAJequitinhonha110.00Coronel MurtaMG
SANTA BARBARA
Santa Barbara
19.00
Sao Goncalo do Rio Abaixo
MG
FAZENDA VELHA
Santa Barbara
30.00
Sao Goncalo do Rio Abaixo
MG
AÇAFRÃOPiracicaba26.00São Gonçalo do Rio AbaixoMG
MONJOLOPeixe27.00Mato DentroMG
PEIXE BRAVOParaopeba40.00Pará de MinasMG
SALTO TRATEXTeles Pires200.00Colider
MT
SALTO SAO LOURENCO
Sao Lourenco
200.00
Rondonopolis
MT
CHUVISCOErepecuru37.00OriximinaPA
MANIVATrombetas83.00OriximinaPA
QUELUZ Paraiba do Sul 28.50QueluzRJ
FORTALEZA Paraiba do Sul 28.50QueluzRJ
MACAEMacaé50.00LumiarRJ
MAMBUCABAMambucaba135.00Angra dos ReisRJ
TOTAL:2,276.50
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ANNEX II
POWER PROJECTS TO BE OFFERED IN PUBLIC BIDDING
The official DNAEE list of 72 plants to be submitted to public bidding in the period 1995-2004. Ten plants are gas fueled thermoelectric and 62 are hydroelectric.
HYDROELECTRICS
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Bidding Date
Plant Name
08/95
08/95
10/95
10/95
10/95
12/95
12/95
06/96
08/96
09/96
12/96
12/96
04/97
12/97
12/97
12/97
I/98
I/98
II/98
II/98
II/98
II/98
II/98
II/98
II/98
II/98
II/98
II/98
II/99
II/99
São José
Carrapatos
Rosal
Sapucaia/Anta
Cubatão
Campos Novos
Bocaina
Simplicio
Irapé
Cana Brava
Sitio Grande
Santa Clara
Funil-Ribeira
S. Quebrada
Itapebi
Porteira
Capim Branco
Sacos
Cebolão
Jataizinho
Cotingo
Anhanguera
Palmeiras
Retiro
Monjolinho
São Sebastião
São Domingos
Franca Amaral
Lajeado
Estreito
River/State
Pardo\SP
Pardo\SP
Itabapoana/RJ/ES
Par. do Sul RJ/MG
Cubatão/SC
Uruguai/SC
Paranaiba/MG/GO
Par. do Sul/RJ/MG
Jequitinhonha/MG
Tocantins/TO
Das Fémeas/BA
Mucuri/BA
Rib.do Iguape/SP
Tocantins/TO
Jequitinhonha/BA
Trombetas/PA
Araguari/MG
Formoso/BA
Tibagi/PR
Tibagi/PR
Cotingo/RR
Sapucai/SP
Sapucai/SP
Sapucai/SP
Sapucai/SP
Sapucai/SP
Sapucai/SP
Itabapoana/RJ
Tocantins/TO
Tocantins/TO
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Potential (MW)
19
17
55
316
45
880
150
180
420
450
19
23
150
1328
375
714
600
114
194
192
68
20
15
15
4,7
19
13,9
33
800
1000
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31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
Bidding Date
Plant Name
II/99
II/99
II/99
2000
2000
2000
2000
2001
2001
2001
2001
2001
2001
2001
2001
2001
2001
2001
2001
2001
2002
2002
2002
2002
2002
2002
2003
2003
2003
2003
2004
2004
Belo Monte
S. da Divisa
S.Isabel(baixo)
Barretos
Peixe
Viradouro
Salto Pilão
Itaocara
São Fidelis
Ourinhos
Couto Magalhães
Serra do Facão
Ipueiras
Formoso
Barra do Peixe
Mauá
São Jerônimo
Barra Grande
Ji-Paraná
Teles Pires
Pedra do Cavalo
Batatal
Resplendor II
Murta
Foz do Bezerra
São Domingos
Baguari I
Telémaco Borba
Foz do Chapecozinho
Fundão
Jaborandi
Sapucai
River/State
Xingu/PA
Jequitinhonha/MG
Araguaia/TO
Pardo/SP
Tocantins/TO
Pardo/SP
Itajai-açu/SP
Paraiba do Sul/RJ
Paraiba do Sul/RJ
Paranapanema/SP
Araguaia/GO
São Marcos/GO
Tocantins/TO
São Francisco/BA
Tocantins/TO
Tibagi/PR
Tibagi/PR
Pelotas/SC
Ji-Paraná/RO
Teles Pires/MT
Paraguaçu/BA
Rib.do Iguape/SP
Doce/MG
Jequitinhonha/MG
Paraná/TO
Paraná/TO
Doce/MG
Tibagi/PR
Chapecó/SC
Jordão/PR
Pardo/SP
Sapucai/SP
Potential (MW)
11000
541,5
1300
61
1106
45
133
210
123
48,4
200
210
600
300
450
388
284
880
512
1500
300
95
363
110
300
200
169
128
184
154
61
12
TOTAL29,187.5
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THERMOELECTRICS (NATURAL GAS)
Bidding Date
1
10/95
2
01/96
3
01/97
4
01/97
5
07/97
6
12/97
7
12/98
8
03/99
9
09/99
10
TOTAL
Plant Name
Municipality/Stat
CORUMBA I
CAMPO GRANDE
MAUÁ 7/8
CAIARI
APARECIDA 7/8
GÁS DA BOLIVIA /SP
REPLAN I
CORUMBÁ II
CAMPO GRANDE II
09/02
CORUMBÁ/MS
CAMPO GRANDE/MS
MANAUS/AM
PORTO VELHO/RO
MANAUS/AM
A DEFINIR/SP
A DEFIMR/SP
CORUMBÁ/MS
CAMPO GRANDE /MS
CAMPO GRANDE III
Capacity (MW)
57,9
100,0
160,0
240,0
100,0
1500/2000
350
57,9
100,0
CAMPO GRANDE/MS 70,0
2735.8 ,/ 3235.8
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USEFUL ADDRESSES AND TELEPHONE NUMBERS
Brazil’s country code for telephone calls is 55.
ABRACE (Brazilian Association of Large-Scale Energy Consumers/Assossiação Brasileira de Grandes Consumidores de Energia)
Av. Paulista 1439, 11 andar. CEP 01311926 - Sao Paulo, SP
Phone: (11) 284-3570/284-4965
Fax:
(11) 288-3882
Executive Secretary: Paulo Ludmer
ACCE (Brazilian Association of Power Plant Builders)
Assossiação de Construtores de Energia)|
Rua Arizona 1366, 10 andar. CEP 04567003 - Sao Paulo, SP
Phone: (11) 5326548/530-6821
Fax:
(11) 533-4660
Executive Secretary: Carlos Alberto Felizola Freire / Chairman: Mario C. de Oliveria Pinto
BNDES (National Bank for Economic and Social Development
Banco Nacional de Desarollo Economico e Social)
Av. Republica de Chile 100. CEP 20139900 - Rio de Janeiro, RJ
Phone: (21) 277-7447
Fax:
(21) 533-1572
Chairman: Edmar Bacha / Head of Privatization: Helena Landau
BRAZILIAN NATIONAL COMMITTEE OF THE WORLD ENERGY COUNCIL
Rua Real Grandeza 219, 6 andar. CEP 22283 - Rio de Janeiro, RJ
Phone: (21) 246-8593
Fax:
(21) 226-0508
Telex: (21) 212-1166/213-6471/213-8663
Executive Secretary: Jose Magalhaes da Silva
CESP
Rua Ministro Rocha Azevedo 25. CEP 01410900 - Sao Paulo, SP
Phone: (11) 287-1026
Chairman: Andrea Matarazzo
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DNAEE (National Department of Water and Electrical Energy/Departamento de Aguas e Energia Elétrica)
SGAN, Quadra 603Módulo J, 2 andar. CEP 70830030 - Brasilia, DF
Phone: (61) 226-5074/321-5158
Fax:
(61) 821-5482
Director: Jose Said Britto
Phone: (61) 225-2617/223-4592
Fax:
(61) 321-5482
Deputy Director: Demostenes Barbosa da Silva
Coordinator for Tariffs: Evaldo Melo da Paz
Coordinator for concessions: Eduardo Alberto La Rosa
Phone: (61) 224-2599
DNC - Departamento Nacional de Combustiveis
Setor de Grandes Areas Norte - Quadra 603 Modulo H. 70830 - Brasilia - DF
Chairman: Ricardo Pinto Pinheiro
DNPM - NATIONAL DEPARTMENT OF MINERAL PRODUCTION/ DEPARTAMENTO NACIONAL DE PRODUCAO MINERAL (Coal)
SAN, Quadra 1, Bloco B. CEP 70040200 - Brasilia, DF
Phone: (61) 226-0444
Fax:
(61) 223-5818
Deputy Director: Otto Bittencourt Netto
ELETROBRAS (Centrais Eletricas Brasileiras S/A)
Av. Presidente Vargas 642, 10 andar. CEP 20079 - Rio de Janeiro, RJ
Phone: (21) 226-2125
Dept. of Economic and Market Studies: Keynes Bolivar
Phone: (21) 242-2694/296-3939
MINING AND ENERGY MINISTRY
National Energy Secretariat. Esplanada dos Ministerios, Bloco R, 3 andar. CEP 70044 - Brasilia, DF.
National Secretary for Energy: Peter Greiner
Phone: (61) 225-4072
PETROBRAS (Petroleo Brasileiro S.A.)
Av. Republica do Chile 65, 8 andar. CEP 20035 - Rio de Janeiro, RJ
Chairman: Joel Renno
Phone: (21) 2237953
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PRESIDENCY OF THE REPUBLIC
Strategic Affairs Secretariat/Secretaria Nacional de Assuntos Estrategicos
Palacio do Planalto - Brasilia, DF
Office head: Marllia de Barros Santos
Phone: (61) 211-1193/211-1729/211-1424
REDE (Empresas de Energia Eletrica/Association of five independent producers of energy)
Av. Paulista 2439, 4 andar. CEP 01311-300 - Sao Paulo, SP
Phone: (11) 883-8111
Fax:
(11) 644-4100
Chairman: Jorge Queiroz de Moraes, Jr.
SOCIEDADE PRIVADA DE GAS (Private Gas Association)
Rua 9 de de Julho 5229. Sao Paulo, SP - Phone: (11) 8836778
Contact: Ayrton Bassani
For General Statistics
FUNDACAO INSTITUTO BRASILEIRO DE GEOGRAFIA E ESTATISTICA - FIBGE
Av. Franklin Roosevelt, 166. 20021 - Rio de Janeiro - RJ
SECRETARIA NACIONAL DE ENERGIA - SNE
Departamento Nacional de Desenvolvimento Energetico - DNDE
Esplanada dos Ministerios, Bloco R - 3° Andar. 70044 - Brasilia - DF
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Bernardo Kucinski
Glossary of names of key businesses, government agencies and companies
BANERJ: Banco do Estado de Rio de Janeiro. State Bank of Rio de Janeiro
ELETRONORTE: Centrais Eletricas do Norte do Brasil S.A. North/Central-West regional
electric company; subsidiary of Eletrobras
BANESPA: Banco do Estado de Sao Paulo. State Bank of Sao Paulo
ELETROPAULO: Eletricidade de Sao Paulo. Sao Paulo state electric company
BNDES: Banco Nacional de Desarollo Economico e Social. National Bank for Economic
and Social Development, acts as privatization agency and manages privatization fund, which
receives shares of government companies to be privatized
ELETROSUL: . Southern regional electric company; subsidiary of Eletrobras
ENERSUL: Empresa de Energia do Sul do Brasil
CELESC: Companhia de Eletricidade do Estado de Santa Catarina. Santa Catarina state
electric company
FURNAS: Southeast/Central-West regional electric company; subsidiary of Eletrobras
IBAMA: Instituto Brasileiro de Meio Ambiente. Brazilian Environmental Institute (federal
environmental protection agency)
CEMAT: Centrais Eletricas Matogrossense, S.A. Mato Grosso state electric company
CEEE: Companhia Estadual de Energia. Rio Grande do Sul state electric company
LIGHT: Light Servicos de Eletricidade. Rio de Janeiro state electricity distributor
CEG: Companhia Estadual de Gas. Rio de Janeiro state gas company
NUCLEN, Servico: nuclear energy program; Eletrobras subsidiary
CEMIG: Companhia de Eletricidade de Minas Gerais. Minas Gerais state electric company
PETROBRAS: Petroleos Brasileiros S.A.. federal oil and gas company
CEPISA: Centrais Eletricas do Piaui. Piaui state electric company
SINTREL: Sistema Nacional de Transmision Energia Eletrica. National System for the
Transmission of Electric Energy (national electricity grid)
CERJ: Companhia Eletrica do Rio de Janeiro. Rio de Janeiro state electric company
CESP: Companhia Energetica de Sao Paulo. Sao Paulo state energy company
TELEBRAS: Telecommunicacoes Brasileiras S.A.. federal telecommunications holding
company
CHESF: Centrais Eletricas do Rio Sao Francisco. Northeast regional electric company,
subsidiary of Eletrobras
COELBA: Companhia de Eletricidade de Bahia. Bahia state electric company
COELCE: Companhia Energetica do Ceara. Ceara state energy company
COMGAS: Companhia Gas de Sao Paulo. Sao Paulo state gas company
COPEL: Companhia Paranaense de Energia. Parana state energy company
CPFL: Companhia Paulista de Forca e Luz. Sao Paulo state light and energy company
DNAEE: Departamento de Aguas e Energia Eletrica. National Department of Water and
Electric Energy (federal energy regulatory agency)
ENERSUL: Empresa de Energia do Sul do Brasil, S.A. Mato Gross do Sul state electric company
ESCELSA: Espirito Santo Centrais Eletricas . former Espirito Santo state electricity
distributor, privatized in July 1995; was subsidiary of Eletrobras
ELETROBRAS: Centrais Eletricas Brasileiras S.A. federal electricity holding company, also
historically has acted as regulatory agency; part of mining and energy ministry
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The Privatization of Brazil`s Electricity Sector

Transcrição

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