Pernambuco III Thermal Power Plant

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In July 2009, Termeletrica Pernambuco S.A., a partnership of the Brazilian group Bolognesi (86.4%) and the Brazilian state-owned investment fund FI-FGTS (13.6%), was granted the authorization to build and operate a 200.8-MW diesel fueled power plant located in the state Pernambuco. The power plant was named UTE Pernambuco III. The 35-year contract was signed with the regulatory agency ANEEL in February 2009. The project was initially proposed by Multiner S.A and A&G Energia e Empreendimentos Ltda, but Bolognesi and investment funds acquired Multiner S.A. in April 2012. The value of the investment committed to UTE Pernambuco III was estimated at US$ 195.4 million (BRL 460 million). UTE Pernambuco III won the public bidding that took place in September 2008 to sell electricity to several distribution companies, by offering a tariff of US$ 79/MWh (BRL 144.7/MWh). The project company signed 15-year power purchase agreements with the several electricity distribution companies. UTE Pernambuco committed to start supplying to the market in 2013, and, as of March 2013, 53.25% of the construction works had been concluded. Commercial operations commenced in December 2013. In November 2013, the company issued US$ 127.4 million (BRL 300 million) in 12-year bonds. 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 accelerated depreciation methods of accounting for construction expenditures. Finally, the electricity sold by the company was free from sectoral taxes.