Brazil’s power problems mount
Brazil’s power utilities are running out of money even though an electricity tariff increase has been approved by the regulator, Aneel.
The government is being blamed for its lack of effort in boosting investor confidence. President Luiz Inacio Lula da Silva criticized the efforts of the regulatory agencies in that they have failed to control prices as the country suffers inflation. Many utilities now fear bankruptcy as resources drain away. More price hikes are inevitable and a last resort possibility is to renationalize the utilities.
This has been a situation that has been facing AES for sometime with its Eletropaulo asset. The US company failed earlier this year to pay a $85m instalment on its $1.2bn debt with BDNES National Development Bank for the acquisition. To settle part of the debt, AES has offered to give up 50 per cent of Eletropaulo as well as other assets.
A rescue plan is to be drawn up to resolve the situation.
Calpine tightens grip on turbine spending
Calpine Corp. has reduced contract commitments with gas and steam turbine manufacturers including GE Power Systems, Siemens Westinghouse and Toshiba International Corp.
The deal has allowed Calpine to release some $3.4bn giving them the option to focus on other equipment areas as well as keeping liquidity fluent for the medium to long term. The company has cancelled 11 gas turbines and two steam turbines. This leaves the company’s capital commitment for turbines at $594m, down from $4bn.
Alliance to operate US assets
Wood Group Power and Miller, McConville, Christen, Hutchison and Waffel (MMC) have formed an alliance in a bid to work a portfolio of power assets in the US.
MMC will fund acquisitions of selected power assets and will be responsible for their operational control and risk management. Wood Group will provide operational and engineering due diligence support for each power asset or portfolio acquisition.
Ontario does u-turn in Hydro One spin-off
Canada’s state-owned transmission grid, Hydro One, is not for sale any longer, Premier Ernie Eves has announced. The government said the decision boils down to protecting energy consumers in Ontario.
Uncertainty over the sale started in December 2001 when plans for its privatization were announced. After authorization blocks threatened to scupper the sale, Eves announced in July 2002 that only a 49 per cent stake would be sold. Recent complaints from consumers about the impacts of the sale prompted Eves to cancel it altogether.
In November last year, the Ontario government announced that it would freeze electricity prices and hand cash back to consumers whose costs had soared during five months of California-style price spikes. The rate freeze caused the value of Hydro One to drop.
Potential buyers that expressed an interest in Hydro One included SNC-Lavalin Group, and National Grid Transco.
Argentina power prices on the up
In a bid to aid foreign investors, Argentina has announced an electricity tariff hike of between seven and nine per cent.
President Eduardo Duhalde signed a decree that will enable the increase by November 2003. The utilities have been unable to raise rates since the 70 per cent currency devaluation last year caused a freeze in pesos. The news will please foreign investors such as Electricité de France and BG Group, which have projects in the country.
The announcement came after the government renegotiated contracts with the country’s 59 public utilities. The IMF and World Bank began talks with the companies last month to organize the renegotiation of the contracts.
More for less in wind order
GE Wind Energy, a unit of GE Power Systems, has reduced the footprint of a proposed wind farm without reducing the generating capacity.
The offshore wind farm off the Cape Cod coast in the USA will now be 14 per cent smaller than originally planned, a reduction of 28 km2. The reduction in size is down to the use of GE’s latest 3.6 MW wind turbines, which will reduce the number of turbines needed from 170 to 130. The news will appease neighbouring residents who believe that the wind farm would spoil their views.
The project will be the largest offshore wind farm in the world, and could be operational by 2009.
The project is the first offshore wind farm in the US and is part of Massachussets’ plans to implement four per cent of renewable energy by 2009, and part of a bigger drive to add more renewable power in the US, which is lagging behind most European countries.
In the US, less than one per cent of electricity supply comes from wind sources, whereas in Denmark it accounts for 17 per cent and in Germany four per cent.
Argentina: Tenaris announced that its Argentine subsidiary, Siderca, has acquired Reliant Energy Cayman Holdings from CenterPoint Energy Light, a subsidiary of CenterPoint Energy, for $23.1m. The company’s principle asset is an electric power generating facility located in San Nicolas, 300 km west of Buenos Aires.
Chile: Chile-based electricity giant Enersis announced it would sell two of its Chilean subsidiaries as part of a restructuring plan to reduce its heavy debt. Enersis, Latin America’s largest non-state energy holding and an investment unit of Spain’s Endesa, said it would sell its Rio Maipo distributor unit and the Canutillar generator owned by its Endesa Chile unit.
Colombia: The Energy and Mines Ministry expects to open a tender soon for the first phase of a major electricity transmission project. The two-phase project will strengthen the transmission grid between the Atlantic coast and central Colombia, and involves construction of over 1100 km of lines.
Ecuador: Ecuador’s power regulator Conelec has annulled a $520m contract with Spanish consortium ACS-Cobra-Omegaport to build and operate the 186 MW Mazar hydroelectric project due to proposed changes to the contract terms.
Mexico: Siemens has won a $192m contract from Mexico’s state power company CFE for the supply of two turnkey simple cycle power plants. One plant with two gas turbine units and a combined capacity of 263 MW will be built in San Lorenzo, southeast of Mexico City.
USA: Entergy Corp. has dropped plans to build a $500m power station in Iowa, citing overbuilt generating capacity in the Midwest and increasingly steep prices for natural gas to fuel the plant. The Iowa Utilities Board posted an order on its website approving an application to cancel the 615 MW power project.
USA: Bechtel Power Corp. and its teaming partner, Westinghouse Electric Corp., completed a world record steam generator replacement for the STP Nuclear Operating Co. on its south Texas Plant Unit 2. All was accomplished without any lost-time accidents.
USA: US federal energy regulators aim to release in April a report on its proposal for creating a uniform US wholesale power market in an effort to collect one last round of comments before issuing its final plan in July.
USA: Mirant Corp. said it will drop plans to build a $500m power plant in North Carolina. Mirant told financial analysts it would not pursue projects in the southeast and cut back other projects in the US and overseas as the global economy shows no sign of steadying.