Power Engineering - Brazilian trade groups want 11 amendments to new electricity model

17 February 2004 - Brazilian power sector trade groups are pushing for the approval of 11 amendments to the new power model decrees, five entities said in a joint statement published Monday. The group insist the changes are key to attract the 20bn reais ($6.9bn) annual investment necessary to meet the country's future power needs, according to a report from Business News Americas.

The amendments "do not transform the model proposed by the government. On the contrary, they offer a more solid and consensual base for the secure introduction of new rules by contributing to make the sector viable," the statement said. The statement was signed by the associations of independent power producers (Apine), of distributors (Abradee), of traders (Abraceel) and of concessionaries (Abce).

The 20bn reais investment would be necessary for Brazil to grow at 3.5 per cent a year, but the government could invest only up to 9bn reais through state-controlled companies, the statement said.

The statement comes as negotiations became tougher at the end of last week. On Thursday, government and opposition parties had made a political commitment to vote on the decrees on Tuesday, but government resistance to some of the 11 amendments proposed by industry groups brought talks to a stalemate.

On Monday, congressional aides to majority leader, senator Aloizio Mercadante, and to ruling Workers' Party senator Delcidio do Amaral, who is leading the debate on decrees, told BNamericas they were not sure the decrees would be voted on Tuesday.

However, Apine executive director, Eric Westberg, was optimistic an agreement would be reached, allowing a vote to take place before the week is over. "Overall the model is good, but we need to amend some points to make it more transparent and long-lasting," he told Business News Americas. 'This is what will attract investments in the long run."

Apine represents power producers such as Belgium's Tractebel and US company Duke Energy, which recently bought generation assets and invested to expand capacity in the country. Westberg said the new model needs to distinguish between the sale of power by old, amortized generators and companies that have made recent investment and are still paying off their loans.

"The model needs to allow investors to obtain a return and this is what the board of power companies and financial committees of banks will be looking at," he said.

The minimum agenda also seeks public audiences for further power sector regulations and permission for distributors to pass through the effects of high costs to power rates. It also calls for the removal of prohibition of annual rate increases if distributors default on payment to sector funds or to state-controlled generator Itaipu.

The government has already agreed to introduce a transition period that would allow generators to seek long-term contracts sales through 2008, when the government expects equilibrium between power supply and demand, local press reported.

"This is an advance, showing the government is negotiating, but it is important that the new model be approved as quickly as possible for investment decisions to be made. The new model is good but it needs to be implemented," said Sudameris BNAmro analyst Rosangela Ribeiro

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