Espirito Santo Centrais Eletricas SA (ESCELSA)

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Espirito Santo Centrais Eletricas SA (Escelsa) is an integrated electric utility that serves the state of Espirito Santo. The company has a concession area of 41,372 square km and serves a population of 2.6 million located in 67 municipalities. Its main assets were 2,838 km of transmission lines, 30,681 km of distribution lines, and 174 MW of installed capacity. This generating capacity represents 22% of its electricity sales. The remaining electricity (78%) is bought from Electrobras subsidiary Furna and from the joint Brazilian-Paraguayan Itapu hydro facility. Escelsa was partially privatized in July 1995 when 50% plus one share of the company was sold for $387.33 million to Iven Group, a consortium of Brazilian investment banks (Citibank, Pactual, Icatu and Opportunity) and 10 pension funds through an auction on the Rio de Janeiro Stock Exchange. This sale represented the first privatization transaction in Brazil's electric sector. In August 1999, Electricidade de Portugal (EdP) bought 49% of Iven Group; the remaining 51% was equally owned by Opportunity and Citibank. In the third quarter of 2001 EdP increased its management control over Escelsa through acquisition of an additional 9% interest in the Iven Group. Following this acquisition EdP paid $19.2 million in an unusual transaction to gain the "use" of Opportunity's shares in the Iven group for a period of 24 years. As of July 2002, EdP participation in Iven Group had increased to 73.12%, which in turn owned 52% of Escelsa. In October 2002, EdP took control over Escelsa, after a dispute with other shareholders. In December 2003, after finalizing the first stage of a major corporate reestructuring, EdP transfered the control of Escelsa to EdP Brasil, one of the its subsidiaries. In 2002 the company received a loan of US$ 56.8 million (R$ 166 million) from BNDES (the Brazilian bank for development). This loan was granted by BNDES to compensate the company for the losses incurred during the electricity rationing program implemented by the Brazilian government from Jul. 2001 to Feb. 2002. This program was carried out as a response to the electricity supply crises occurred during 2001. Investments in telecommunications were eliminated for 2006 as they did not expand the infrastructure assets. The company has undertaken the following additional investment in infrastructure: US$ 63.7 million in 1996, US$ 66 million in 1997, US$ 77.8 million in 1998, US$ 53.1 million in 1999 and US$ 43.5 million in 2000. In 2002 the company invested US$ 20.9 million (R$ 61 million) and the total electricity consumption was 6,394,928 MWh.