Interligacao Eletrica Garanhuns

active

In December 2011, Consorcio Garanhuns - a partnership of the Brazilian state-owned company Companhia Hidro Eletrica do Sao Francisco (49%) and CTEEP - Companhia de Transmissao de Energia Eletrica Paulista (51%; subsidiary of the Colombian company ISA) - was awarded in a competitive bidding process the contract to build and operate the 666-km transmission line connecting Luiz Gonzaga-Guaranhuns-Pau Ferro-Campina Grande III-Angelim, located at the states of Alagoas, Paraiba and Pernambuco. Four other companies took part in the contest: ?? ABENGOA CONCESSOES BRASIL HOLDING S/ A; ALUPAR INVESTIMENTO S/A; COBRA INSTALACIONES; and NEOENERGIA. The bidding criteria set by the regulatory agency ANEEL was the lowest required annual revenue. Consorcio Garanhuns presented the lowest offer, a total value of US$ 42.2 million (BRL 68.9 million), 38% below the ceiling set by the regulatory agency. The contract was signed in December 2011, and the sponsors created the company Interligacao Eletrica Garanhuns S.A. to lead the project during the 30-year contract period. The sponsor committed to invest US$ 398.9 million (BRL 939 million) in the transmission line. In December 2013, Interligacao Eletrica Garanhuns was awarded a US$ 151.8 million (BRL 357.4 million) million loan from the state-owned bank BNDES. Environmental clearance was awarded in July 2013. Construction works commenced in August2013 and were expected to be concluded by November 2014. 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.