Macae Thermal Power Project

completed

The Macaé Thermal Power Plant is a US$656 million, 870 MW simple-cycle, "quasi" merchant natural gas-fired plant, located in the municipality of Macae, on the northern coast of Rio de Janeiro state (the project). Brazil has been experiencing an energy crisis resulting from several years of significant under-investment in new generation and transmission capacity and over-reliance on hydropower. The project is being developed under the Priority Thermal Power Program launched in 2000 by the government of Brazil. As such, the Macaé plant underpins the government’s objective to more optimally balance Brazil’s sources of energy supply by increasing thermal generation capacity, thereby reducing the country''s reliance on hydropower. The project will provide reliable and flexible thermal power to the Southeast region, one of the areas heavily impacted by the energy crisis. The project is located on a 300ha parcel of land in a rural area of the municipality of Macae. Gas is supplied by a 9km pipeline connecting to the existing main gas pipeline between Campos and Rio de Janeiro. Electricity will be transmitted through an existing 345 kV transmission line of Furnas (Brazilian power company) which crosses the project site. The project site is located next to another proposed gas-fired power project called Norte Fluminense (755MW). An Environmental Impact Assessment Report was prepared in October 2000 for a 700MW configuration in accordance with Brazilian environmental assessment regulations. This EIA was updated in December 2001 due to the change of the configuration to 870MW. Cumulative impacts of the project and its neighboring Norte Fluminense project were assessed in the EIA. Extensive public consultations have been held by El Paso Energy International (the Sponsor) including the Public Hearing on February 15, 2001 chaired by the Rio de Janeiro State Office of the Environment and Sustainable Development. The project has obtained all the necessary environmental licenses for the construction and operation. The operation started partially in November 2001 and construction is expected to be completed in the summer of 2002. The project is designed to operate as a merchant power plant in the wholesale electricity market and is strategically located to provide a flexible generating capacity to improve the reliability of the regional electricity transmission grid. The Sponsor has selected a simple-cycle configuration to best fit the local grid system''s expected need of the plant: i.e. flexible generating capacity to operate in a complementary mode to hydro generation (e.g. daily start-up/shut-down, spontaneous generation during dry season). The selected gas turbines for the project have high generating efficiency among the other gas turbines of similar range in the market. Assuming that the project operates at an average annual capacity factor of 40% (3,000GWh/year) at an average thermal efficiency of 35%, the project is expected to consume around 1 billion cubic meters of natural gas per year, emitting about 1.8 million ton CO2 per year, equivalent to about 0.6% of the total Brazilian CO2 emissions per year in 1998 (296 million ton CO2 per year). The Sponsor is committed to invest R$8,400,000 to implement various environmental offset programs identified during the public consutlation process, including with the Municipality of Macae, the Rio de Janeiro State environmental agencies and NGOs. These programs include R$5,000,000 for the protection of the Desengano State Park (important Atlantic Rainforest), R$270,000 for the preservation of the Macae River, R$1,250,000 for the reforestation of degraded areas along the Macae River, etc.The 300 ha project site was acquired from the Santa Rita Ranch. Some 17 families employed by the ranch did not have title to the land and were economically displaced when this large section of the ranch was sold to the project and ranching activities were significantly reduced. After consultation with the affected families (9 households living on land purchased by the project and 6 households living on remaining ranch land), the Sponsor purchased a 40 ha area of farm land about 18 km from the project site near the highway intersection with the main road to Macaé town. Two individuals opted for cash compenstion and voluntarily relocated to new jobs elsewhere; the project undertook to relocate the remaining 15 families (61 people). These households will be provided with irrigated parcels, fruit tree plantations, housing and services at the new site. The Resettlement Plan provides for technical assistance, training, and credit as part of an income improvement project for the resettlement community. The Resettlement Plan was prepared in accordance with the World Bank policy on involuntary resettlement, and is being implemented to the satisfaction of affected families and IFC.