Latin Finance - July 2008 - (Page 31)

brazil hydro realize that these projects have an impressive upside beyond income.” Dupui adds that the projects, because of size and structure, are excellent candidates for IPOs once they start generating electricity and cash. Indeed, both the Santo Antonio and Jirau consortia say they intend to launch IPOs in 2012 or 2013. Belo Monte Elephant Looms The sector’s potential is far from exhausted. The government of São Paulo state still wants to privatize CESP, which has six hydroelectric dams that produce a total of 7,455 megawatts. Earlier this year, an auction for the unit – expected to bring in over $8 billion – failed when the federal government refused to guarantee CESP concessions after expiry in 2015. “Without those concessions the auction was unviable,” says Teixeira, who represented a party that had planned to bid for CESP. “If the government passes legislation needed to renew concessions, the auction could happen very quickly.” The federal government is also planning to auction off in September or October rights to build and operate transmission lines to bring energy from Rio Madeira to Brazil’s industrial heartland. These lines will cost an estimated 9 billion reais. “The government has held frequent auctions of transmission lines, and there have rarely been any legal or environmental problems,” says Roberto Malta, another partner at Demarest & Almeida. But the biggest hydroelectric project in Brazil’s history should come in the first half of 2009: a plant in Belo Monte on the Rio Xingú, with an expected capacity of 11,000 megawatts. The BNDES is apparently working with an estimated cost of 22 billion reais for only the first half of the project. Dupui estimates that, even after BNDES financing, the winners of the Belo Monte auction will have to raise $3.0-$3.5 billion. Building a plant in Belo Monte has been a plan in Brazil for over 20 years, but protests from environmental and indigenous people’s groups have blocked it. “The situation is different now,” Cemig CFO Rolla says. “Belo Monte is a key part of the country’s energy plans. They need to build it, and we hope to be a part of it.” “When you add Belo Monte to the two Rio Madeira plants, you’ll have more than 18,000 megawatts of new capacity—which is more than several European countries generate,” Dupui says. “Brazil needs this energy and then a lot more too.” According to the government, the country has an additional 50,000 megawatts of hydroelectrical potential that could be developed in the next few years. For comparison, at the end of 2007 Brazil had approximately 78,000 megawatts of installed hydroelectrical generation capacity. LF UPDATE For more about Brazil hydro investment see www.latinfinance.com > July/August 2008 LATINFINANCE 31 http://www.latinfinance.com http://www.fonatur.gob.mx/ http://www.fonatur.gob.mx/

Table of Contents Feed for the Digital Edition of Latin Finance - July 2008

Latin Finance - July 2008 Contents Investment Banking Outlook Compensation Survey Colombia Investment Banking Borrowers vs. Investors Banorte Profile Braskem Financing Strategy Brazil Hydro Finance Peru Port Privatization Panama Money Flows Argentina Local Markets Guide to Banking Technology Who Said That?

Latin Finance - July 2008

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