Brazil Auctions First Hyro-Dam After Rate Cutting PlanMario Sergio Lima and Gerson Freitas Jr.
The first Brazilian hydroelectric dam license that wasn’t renewed after President Dilma Rousseff imposed rate cuts of 20 percent in 2012 was awarded to the sole bidder at an auction today.
The Novo Oriente group partly owned by a unit of state-run Centrais Eletricas Brasileiras SA won the right to operate the Tres Irmaos dam in Sao Paulo state for 30 years at an auction on the BM&FBovespa SA exchange. With no other bidders, the group offered to accept the 31.6 million-real ($14 million) revenue cap proposed by the government.
Brazil’s court responsible for overseeing government spending and concessions, known as TCU, made a preliminary ruling later today that prohibits the government and new dam owners from signing a contract before the case goes to trial, TCU said in an e-mailed statement.
Cesp appealed to TCU because the government didn’t decide what will be done about a canal that is part of the Tres Irmaos complex. No date was set for the trial.
Rousseff imposed a 20 percent rate cut on dam concessions up for renewal as part of a 2012 plan to rein in inflation, leading Cia. Energetica de Sao Paulo, or Cesp, to give up Tres Irmaos after most of its investment on the unit had been amortized over two decades. Cesp is receiving 1.7 billion reais in compensation for returning the license.
Cesp has rallied 20 percent in Sao Paulo this year and tops gains among Brazilian utilities as the license settlement approached a resolution. It rose as much as 3 percent to 26.89 reais after the auction, the highest intraday level since Sept. 11, 2012. Cesp closed up 0.9 percent at 26.33 reais.
Novo Oriente is 49.9 percent owned by the Furnas unit of Eletrobras, as the state-run utility is known, and the FIP Constantinopla group of undisclosed investors.