Brazilian deals mark gas/power convergence

Foreign companies continue to make inroads in Latin America's converging natural gas and electric power sectors.

Enron Corp. on July 16 won approval of a $500 million contract to build a natural gas-fired power plant in Brazil from state-owned electric utility holding company Eletrobras. Enron last month disclosed its plans to build, own, and operate the 480-MW gas-fired power plant in Brazil's Mato Grosso state (OGJ, June 23, 1997, Newsletter).

Enron and partners also recently won a tender for privatization of Riogas, the local distribution company serving Rio de Janiero (OGJ, July 21, 1997, p. 46).

In addition, Raimundo Brito, Brazil's mines and energy minister, and Firmino Sampaio, president of Eletrobras, signed preliminary accords with two private company groups for the construction of two gas-fired thermoelectric power plants in Rio de Janeiro state.

Meantime, Brazil continues to press efforts to expand its electric power infrastructure, essential to projections of sharply higher gas demand in Latin America's biggest country. The government has strongly endorsed expansion of gas-fired capacity to meet future electric demand.

Latest projects

The power project agreements are part of a broader effort to avoid a looming shortage of electric power in southern Brazil.

The accord to build a 500-MW thermoelectric plant at Macae, Rio de Janeiro state, mainly fueled by natural gas-with a diesel oil backup system-was signed with the BTB group, consisting of BHP do Brasil Energia Ltda., Epic Gas International Servigos do Brasil Ltda., and British Gas do Brasil Ltda. These companies will have a 90% interest in the project with Eletrobras retaining the remaining 10% interest.

This project will be integrated into Brazil's power grid via a 35-km transmission line expected to become operational in 1999.

The other accord includes the creation of an independent power producer company with interests held by Eletrobras; Cerj and Light of Rio de Janeiro state; Escelsa of Espirito Santo state; and Cataguazes-Leopoldina of Minas Gerais state for the construction of a 700-MW gas-fired thermoelectric plant in Rio de Janeiro state. This project will utilize natural gas from the Bolivia-Brazil natural gas pipeline.

Enron's contract

These moves follow Enron's $500 million winning bid to build a gas pipeline and power plant that are tied to a larger pipeline project to supply Bolivian natural gas to Brazil's industrial heartland.

Enron will operate the three-stage project, with ultimate capacity of 480 MW, for 20 years at Cuiaba, capital of Mato Grosso state.

Enron will build a 384-mile gas pipeline stretching from Brazil to Bolivia and supply power to Eletronorte, a local utility unit of government-controlled utility holding company Centrais Eletricas Brasileiras SA. Enron will build the power plant through its Brazilian subsidiary, Empresa Produtora de Energia Ltda.

All these Eletrobras projects with the private sector are designed to meet electricity demand, which is growing faster than the state-controlled power grid's supply capacity. A month ago, southern Brazil suffered a 3-hr blackout when the power grids became overloaded.

Growing power infrastructure

Also on July 16, Brito and Sampaio authorized an international tender for installing a 1,270-km, 500-kv power transmission line interlinking northern and southern parts of the country.

Brazil's power grid has two systems operating separately and concentrating 95% of the country's power consumption. The project will allow alternating power supply to the northern or southern parts of the country during drought seasons, when hydropower is scarce.

Brito said that the linking of these two systems through the new transmission line will result in another 600 MW of capacity being made available, equivalent to installing new power capacity of about 1,000 MW at a cost of $15/MW-hr.

The new transmission line will extend from the city of Imperatriz, Maranhco state, to Serra Mesa in Goias state and is budgeted at $738 million.

The minister also authorized the issuing of a tender for development of another power transmission system to complement the 750-kv transmission system of Itaipu, the huge binational power dam on the Brazil-Paraguay border.

Brito pointed out that this project will enable transfers of power between the southern and southeastern regions of the country, also making it possible to link Brazil's and Argentina's power grids. This will happen with the installation of two more 700-MW units at Itaipu.

The project is expected to come on stream in December 1998.