Foz do Chapeco Hydroelectric Power Plant

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In November 2001, Foz do Chapeco Energia SA signed with ANEEL, Brazil’s federal electricity regulator a 35 year contract to build, finance and operate Foz do Chapeco, a new 855 MW Hydroelectric Power Plant on the Uruguay River, between the states of Santa Catarina and Rio Grande. Under the terms of the contract, Foz do Chapeco Energia SA had 84 months from the date of contract signing to bring the first unit of the plant to operational status. The BOT contract was awarded through an international competitive tender launched in March 2001 by ANEEL, Brazil’s federal electricity regulator. The winning consortium was selected based on the highest amount of annual payments to the government for the right to use the river over the life of the contract. A consortium of Companhia Vale do Rio Doce (CVRD), Serra da Mesa Energia, and Companhia Estadual de Eneergia Eletrica (CEEE) won the tender in August 2001 with an offer of US $10.6 million [Real 20.7 million] per year in annual payments. Payments to the government were to commence from the from the eighth to the thirty-fifth year and had present value of US $97.9 million using a discount rate of 10% for 27 years. The number of final bidders was not publically available. The shareholding structure of Foz do Chapeco Energia SA changed several times between 2001 and 2007. In November 2001, CPFL Energia bought Serra da Mesa Energia; while in late 2006, the Brazilian state owned holding Furnas Centrais Eletricas S.A. (Furnas) bought the share of CVRD. Thus, in 2007, the shareholding structure was as follows: CPFL Energia [Brazil, 51%]; CEEE [Brazil, 9%]; and Furnas [Brazil, 40%]. CEEE and furnace were state-owned enterprises. The total project cost was estimated at US $1.160 billion (BRL $2,262.4 million). The project reached financial closure in July 2007 when the Board of Directors of Banco Nacional de Desenvolvimento Economico e Social (BNDES) approved a BRL 1.6 billion financing to Foz do Chapeco Energia SA. The financing came in two forms: a direct project finance loan from BNDES for US $564 million (BRL 1.1 billion) and a syndication of the commercial banks Bradesco, Santander, Banco do Brasil and Banco Safra for US $283 million (BRL 552 million). This debt financing accounted for approximately 75% of the project while the remaining 25% was to be financed through equity. The project loans received a reduced rate under the Growth Acceleration Program (PAC) which gave interest rate reductions to BNDES funded projects in the segments of: energy transmission and distribution, gas production and distribution, railways, ports, airports, roadways, sanitation and urban transportation. Operations commenced in March 2011. Brazilian Real annual payment of 20.7 = USD $10.6 from the eighth to the thirty-fifth year = PV of a US $10.6 million 27 year annuity with a discount rate of 10%= US $97.9 million