Macae Power Plant

cancelled

El Paso Corporation inaugurated the 870 MW Macae Merchant thermal power plant in November 2001. El Paso invested US$656 million in building the plant located in northern Rio de Janeiro state. The plant used 20 open cycle GE LM 6000 turbines, each with a capacity of 44 MW. On December 4, 2002 the IFC signed a US$65 million loan and US$10 million in quasi-equity to finance the Macae plant. It was to be matched with loans from a syndicate of banks including Brazil's national development bank, BNDES, that released a US$94 million loan to El Paso in 2003, and OPIC, that approved in principle to a US$200 million loan in 2003. El Paso Corporation principally conducted their Brazilian development activities within an investment arm called Gemstone. El Paso Corp. owned approximately 50% of Gemstone, which, in turn, owned 100% of Macae Power Plant. Gemstone Investors, an unrelated party capitalized by private equity (Rabobank International) and debt, owned the remaining 50 percent of Gemstone. Macae is part of a priority program for thermal power plants (Programa Prioritario de Termeletricas), implemented by the Brazilian federal government in 2000. The program, in order to foster the construction of thermal power plants, guarantees natural gas supply for 20 years, provides financing for the construction of the plants (throught the Brazilian Development Bank, BNDES) and provide subsidies for gas transportation costs. Macae signed a PPA with Petrobras, a state-owned company, to sell the total energy produced. The PPA is a take-or-pay contract, in which Petrobras will pay for the electricity regardless of using it or not. In early 2005, Petrobras disputed contingency payments owed to Macae, arguing that the payments were intended to smooth out cash-flow volatility, not to shore up consistent operating deficits. At the end of 2005, Macae and Petrobras were still involved in arbitration proceedings. On May 9, 2006, Petroleo Brasileiro SA (Petrobras) completed the purchase of Macae Merchant for US $357.5 million to settle the dispute with El Paso Corporation. 2006: "El Paso Energy will sell its 928-MW Macae gas-fired station in Rio de Janeiro to Brazilian state oil company Petrobras... Under the terms of the Macae MOU, Petrobras will pay El Paso US$357.5 million for its 100% ownership in Macae and both parties, pending the signing of final documents, will suspend the arbitration proceedings initiated last year by Petrobras, after other attempts to terminate its Macae contract had failed. El Paso said it hopes to close the deal during the first half of the year."