Cabeca de Boi and Da Fazenda Small Hydro Power Plants

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The Brazilian company Heber Participacoes was awarded contracts to build and operate two small hydro power plants located in the Apiacas River, state of Mato Grosso. The power plants were named PCH Cabeca de Boi (30 MW) and PCH Da Fazenda (24 MW). The 30-year contracts were signed with the regulatory agency ANEEL in August 2008. In July 2013, the licenses were transferred to Enel Brasil Participacoes LTDA, a subsidiary of the Italian company Enel, which created the following special purpose companies to lead the projects: PCH Cabeca de Boi – Enel Green Power Cabeca de Boi Participacoes S. A. PCH Da Fazenda – Enel Green Power Fazenda S.A. The government periodically runs public bidding for the sale of energy to the country´s distribution companies. In August 2013, both power plants took part in a competitive bidding process to sell electricity to the regulated wholesale market (30-year power purchase agreements were signed guaranteeing the sale of electricity to the national grid starting in January 2018). The power plants offered a tariff of US$ 51.01 /MWh (BRL 120/MWh). Enel committed to invest US$ 77.4 million in the construction of the power plants. The company announced initially that it would finance the project with its own resources, but a financing deal was approved to the project companies in May 2016. The project companies were granted US$ 41.9 million 1-year bullet promissory notes provided ba Banco Santander. Construction works at PCH Da Fazenda commenced in May 2014 and at PCH Cabeca de Boi in June 2014. The company was granted the right to take part in the government program called Regime Especial de Incentivos para o Desenvolvimento da Infra-Estrutura (Reidi). Companies selected to take part in this program were given tax cuts in the acquisition of capital equipment and construction material acquired both in the domestic and international markets (this incentive represented a cost reduction of about 9.25%). In addition, the company was allowed to use accelerated depreciation methods of accounting for construction expenditures.