Eletrobrás to invest US$1.5bn in 2005

20 August 2004 – Brazil’s federal power holding company Eletrobrás plans to invest 4.6bn reais ($1.5bn) in 2005, mostly to conclude existing generation projects and build transmission lines, the company’s CFO José Saraíva, according to a report by Business News Americas.

The investment is a slight increase from the 4.3bn reais budgeted for 2004.

“The final investment amount was decided after broad discussions with all our subsidiaries and with government agents,” Saraíva said.

The company will invest some 2bn reais in generation, 1.6bn reais in transmission, 340mn reais in the “Luz para Todos” power supply expansion program, 130mn reais in distribution and 14mn reais in research. The company also plans to invest 500mn reais in roads and other infrastructure around its dams and substations, he said.

“If we decide to carry out any other investment in new projects through partnerships with private companies, we will raise the money for it,” he said. “These investment plans are in line with our needs.”

Eletrobrás has yet to decide whether it will participate in the auction for new generation capacity the government is planning to hold by end-1Q05, but Saraíva indicated that it would seek joint ventures with private companies.

By law, Eletrobrás can invest up to 49 per cent in joint ventures with the private sector, and any additional investment would have to be reviewed by the government to guarantee that it complies with the federal government’s fiscal control program, he said.

Saraíva also said that the company will bid at the upcoming auction that the government is preparing for end-November to give power companies the chance to replace expiring contracts.

Eletrobrás ‘ participation in the bidding has been worrying investors since the company controls 80 per cent of Brazil’s 87 000 MW installed capacity, mostly through old hydroelectric dams which allow the group to produce power at very low costs.

“All our subsidiaries have the interest to bid, but we cannot bid in a way that would form a cartel,” he said. “All the different companies have regional interests and I am sure they will compete with each other. We will bid in a way to maximize our returns, but without hurting Brazilian consumers.”

Eletrobrás generators Furnas and Chesf are estimated to have about 3,500MW each of uncontracted capacity, and by law another 25 per cent of initial contracts will expire next year.

Additionally, Eletrobrás will continue to improve its corporate governance and make leaner its balance sheet to raise its American Depository Receipts (ADRs) at the New York stock exchange to level 2 from level 1 by the end of the year.