Minister: Brazil could seize Madeira projects to halt dispute

Brazil’s energy minister warns that the government’s utility holding company could take control of both the 3,300-MW Jirau and 3,150-MW Santo Antonio hydroelectric projects if their progress is threatened by court action between their winning development consortia.

Consorcio Jirau Energia, whose members won a concession auction in December to develop Santo Antonio, filed an appeal of the May concession auction results for Jirau, Santo Antonio’s sister project on the Madeira River. Consorcio Jirau complained that the winner of the Jirau auction, Consorcio Energia Sustentavel do Brasil (CESB), had documentary irregularities and also proposes to move the project nine kilometers from its original location as a way to save 1 billion reais (US$626 million).

Although electricity regulator Agencia Nacional de Energia Eletrica rejected the appeal and ratified auction results, the possibility remained that the Jirau project could be tied up in court. (HNN 7/24/08)

As reported by the government’s Agencia Brasil, Mines and Energy Minister Edison Lobao said August 5 that, to prevent such a delay, the federal government could annul the auction results for both projects and take them over.

Lobao suggested federal utility holding company Centrais Eletricas Brasileiras S/A (Eletrobras) could develop both projects instead. Eletrobras subsidiaries are members of each of the competing consortia. Furnas Centrais Eletricas S/A leads Consorcio Jirau, while Eletrosul Centrais Eletricas S/A is a member of CESB.

Another option might be for the government to order a new concession auction, he said.

�The government will not allow the public interest to be wronged on account of a conflict of business interests between the two consortia,� Lobao said, adding that both consortia could be impugned in a court dispute, delaying both projects.

�We have energy planning that does not allow delays in the schedules,� the minister said. �If we have this threat, with the adjudication of the two hydroelectric plants, it is up to the state to intervene so that nearly 200 million inhabitants are not wronged.�

Nevertheless, Lobao said the government’s intention is not to break contracts, but is to decide disputes between the companies. He said he speaks frequently with the two sides and is convinced a solution can be found that will be acceptable to all sides.

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