Chesf-Brennand Sento Se Wind Farms Phase I

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The partnership of the Brazilian state-owned Chesf (49%) and the Brazilian group Brennand (51%) were granted the authorizations to build three wind power plants located in the state of Bahia (30 MW in capacity each). The 35-year contracts were signed with the regulatory agency ANEEL in February 2011. The sponsors created the special purpose companies Pedra Branca S.A., Sao Pedro do Lago S.A. and Sete Gameleiras S.A. to manage the projects, which were named EOL Pedra Branca, EOL Sao Pedro do Lago and EOL Sete Gameleiras. The total investment in the project was estimated at US$ 214.5 million (BRL 350.4 million). In August 2010, all three wind power plants took part in the same competitive bidding process to sell electricity to the regulated wholesale market, starting in 2013 (20-year power purchase agreement was signed guaranteeing the sale of electricity to the national grid). The average tariff offered in the bidding process by the power plants was US$ 67.1/MWh (BRL 132.5/MWh). A equipment supply agreement was signed with Vestas in July 2011. As of October 2012, construction works were underway. Commercial operations were estimated initially to commence in September 2012, but construction delays led to the postponement of this date to 2013. 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. Finally, the electricity sold by the company is not subject to sectoral taxes. In January 2012, the sponsor applied for carbon credits. In January 2013, the state-owned bank BNDES granted a US$ 166.4 million (BRL 391.7 million) to finance the power plants. Commercial operations commenced in March 2013.