Cachoeirao Small Hydro Power Plant

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The Brazilian company Empresa de Luz e Força Santa Maria S.A. (ELFSM) was granted an authorization to build and operate a 27-MW small hydro power plant located in the Manhuacu River, state of Minas Gerais (between the municipalities of Pocrane and Alvarenga). The power plant was named PCH Cachoeirao. The 30-year contract was signed with the regulatory agency ANEEL in July 2000. In 2002, the sponsor created the special purpose company Santa Maria Energetica S.A. to lead the project due to the law forbidding a single company to operate in the generation and distribution segments simultaneously. In May 2007, state-owned company Cemig entered into a partnership with Santa Maria Energetica to implement the project and the sponsors changed the project company name into Hidreletrica Cachoeirao S.A. (Cemig holds a 49% stake in this company, while Santa Maria Energetica holds 51% of the shares). Hidreletrica Cachoeirao S.A. committed to invest US$ 53 million (BRL 104 million) in the construction of PCH Cachoeirao. Financial closure for the project was reached in 2007, when the company was granted a US$ 36.5 million (BRL 71.3 million) syndicated loan by the state owned bank BNDES (US$ 31 million (BRL 60.6 million) represented funds transferred from Banco do Brasil and US$ 5.4 million (BRL 10.7 million) from Banco de Desenvolvimento de Minas Gerais, both state-owned banks). The remaining cost was set to be financed with the sponsors’ internal resources. Construction works on this power plant started in 2007, and the unit became operational in 2008. PCH Cachoeirao signed a power purchase agreement with the state-owned company Eletrobras for 20 years through the Brazilian Federal program PROINFA (incentive program for alternative power generating companies).