By an OGJ Online Correspondent
Rio de Janeiro, May 16, 2001 à‚– Enron Corp., Houston, is the latest company to consider suspending investment in Brazil’s electric power industry because of a lack of clear regulations.
The warning comes at a time hydropower-dependent Brazil is facing electric power rationing because of a severe drought.
Orlando Gonzalez, copresident of Enron’s South American unit, said the US-based energy company could halt work on the 400 MW thermoelectric plant Cuiaba II in Mato Grosso state and the 400 MW Riogen thermoelectric plant in Macae, Rio de Janeiro state. Riogen was expected to start operating in 2003.
The Cuiaba and Macae power plants are included in the government’s priority program to diversify away from hydropower by building 49 gas-fired thermoelectric plants but are still awaiting environmental licenses. Enron will continue to build the 355 MW Eletrobolt plant in Seropedica, Rio de Janiero state. Eletrobolt is expected to begin operating in October.
Including expansion of Elektro Electricidade e Servicos SA, an electricity distributor in Sao Paulo state in which Enron has an interest, Enron’s projected investments in Brazil in 2001 total $340 million.
Gonzalez said a decision to suspend the investment could turn on what steps Aneel, the national electricity regulator, takes, especially with respect to a definition of regulatory risks and treatment of gas prices. Since much of the gas will be imported through the Brazil-Bolivia pipeline, debate has raged over whether transactions should be conducted in US dollars or the Brazilian real.
Gonzalez, who is also a counselor of the Brazilian association of electric power distributors (Abradee), said the impact of the power rationing announced by the government to begin June 1 can only be evaluated after the government gives precise information concerning the program.
Hydroelectric plants are responsible for 90% of Brazil’s electric power generation. Due to 2 years of poor rainfall, reservoirs are severely depleted. The need to ration power is also blamed on the lack of investment in electric generation in the last decade.
The Enron executive estimated the program could reduce profits 20-30% and costs could rise 5%, if a 20% rationing plan is imposed. The government’s program will be announced Friday.
On May 8, AES Corp. also put on hold plans to invest $2-$2.5 billion on energy projects in Brazil, alleging the government’s electric power pricing policy is jeopardizing its operations.