Forca Eolica Rio Grande do Norte Wind Parks

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The company Forca Eolica do Brasil S.A. was granted authorizations to build seven wind power plants located in the state of Rio Grande do Norte (108 MW in total capacity, municipalities of Areia Branca, Bodo e Rio do Fogo). Forca Eolica was established as a 50/50 partnership of Iberdrola Renovaveis do Brasil (subsidiary of the Spanish Iberdrola Group) and Neoenergia (39% owned by Iberdrola and 12% owned by state-owned bank Banco do Brasil and 49% by Previ pension fund). The 35-year contracts were signed with the regulatory agency ANEEL starting in February 2011. The following special purpose companies were created to manage each plant: Arizona 1 Energia Renovavel S.A., Calango 1 Energia Renovavel S.A, Calango 2 Energia Renovavel S.A, Calango 3 Energia Renovavel S.A, Calango 4 Energia Renovavel S.A, Calango 5 Energia Renovavel S.A and Mel 2 Energia Renovavel S.A . The power plants were named EOL Arizona 1 (28 MW), EOL Calango 1 (30 MW), EOL Calango 2 (30 MW), EOL Calango 3 (30 MW), EOL Calango 4 (30 MW), EOL Calango 5 (30 MW) and EOL Mel 2 (20 MW). The total investment in the power plants was estimated at US$ 421.6 million (BRL 832.74 million). In March 2012, the state-owned development bank BNDES approved the following loans (total of US$ 164.6 million or BRL 325.1 million): - EOL Arizona 1: US$ 44 million (BRL 86.9 million) - EOL Calango 2: US$ 41.9 million (BRL 82.7 million) - EOL Calango 3: US$ 45.7 million (BRL 90.2 million) - EOL Mel 2: US$ 33.1 million (BRL 65.3 million). In July 2012, the following additional loans were granted by BNDES: - EOL Calango 1: US$ 42.2 million (BRL 82.3 million) - EOL Calango 4: US$ 43 million (BRL 83.9 million) - EOL Calango 5: US$ 42.3 million (BRL 82.6 million) The remaining investment cost was set to be financed with the sponsor's own resources. The government periodically runs public bidding for the sale of energy to the country´s distribution companies. The seven power plants controlled by Forca Eolica won the public bidding that took place in 2010, by offering an average tariff of US$ 67.3/MWh (BRL 133/MWh). The project companies signed 20-year power purchase agreements with the several electricity distribution companies , and the agreements included the annual adjustment of the tariff to the inflation rate. Forca Eolica do Brasil committed to start supplying to the market in 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 accelated depreciation methods of accounting for construction expenditures. . Finally, the electricity sold by the company is not subject to sectoral taxes. In 2011, the company applied for carbon credits. EOL Mel 2 commenced operations in February 2013, while EOL Arizona 1 commenced operations in October 2013.