Brazil to revise hydro dam capacity before privatizations

Reuters News
Posted: Jul 17, 2017 5:35 PM

SAO PAULO (Reuters) - Brazil is planning to lower the estimated capacity of several older hydroelectric dams before they are privatized by state-controlled power holding company Eletrobras, a senior energy official told Reuters on Monday.

The revisions will reduce the amount of energy that the dams can legally offer to the market - part of an effort to create a more robust and predictable power grid as the government seeks more private investment for the sector.

"Privatization will come after the revision. The important thing is that it not be a risk at the time of the sale," Paulo Pedrosa, executive secretary of the Mining and Energy Ministry, said in a telephone interview.

Earlier this year, a government study suggested that hydroelectric capacity estimates could be lowered by about 845 megawatts, with nearly two-thirds of that coming from the massive Itaipu dam shared with neighboring Paraguay.

The rest of the revisions suggested in the study would come largely from the Sobradinho, Paulo Afonso and Luiz Gonzaga dams, leading candidates for privatization by state power company Eletrobras, known formally as Centrais Eletricas Brasileiras SA.

A severe drought starting in 2014 forced many operators of hydro dams to buy electricity on the open market to meet their obligations, adding to sharp price swings and broken contracts.

That crisis bolstered a plan by President Michel Temer, made public this month, to overhaul the energy sector by loosening price controls, cutting taxes and encouraging asset sales by Eletrobras, which now dominates the industry.

The proposed capacity revisions would not affect the hydro dams' obligations, but would reduce their potential to generate revenue. By making them before Eletrobras puts the operations up for sale, the government is aiming to reduce uncertainty and bring more bidders to the table for the upcoming privatizations.

(Reporting by Luciano Costa; Writing by Brad Haynes; Editing by Matthew Lewis)