GE Said to Suffer Payment Delay on Brazil Corruption Scandalby
Queiroz Galvao said to owe $150 million to General Electric
Companies struggling to get financing amid record recession
General Electric Co.’s renewable energy business in Brazil is facing delays in getting paid by a client that’s involved in a corruption probe, according to two people with direct knowledge of the matter.
GE is owed about 500 million reais ($150 million) by the Brazilian conglomerate Queiroz Galvao SA, according to the people, who asked not to be named because the information is private. The payments are on hold because the company’s construction unit is ensnared in the so-called Car Wash investigation into corruption at the state-run oil colossus Petroleo Brasileiro SA.
Another unit, the energy company Queiroz Galvao Energia, purchased wind turbines from GE and was planning to pay for them with a loan from Brazil’s development bank BNDES, according to the people. That financing has been delayed after investigations into sister company Construtora Queiroz Galvao unfolded. The energy company has five wind complexes in northeastern Brazil with 759 megawatts of capacity in operation or under development, according to its website.
Queiroz Galvao has held negotiations with GE “due to the delay in long-term loans, which were agreed and set out in the company’s business plan,” according to an e-mailed reply to questions. The energy unit is an independent company that has no relation to the legal issues involving the construction business, the Rio de Janeiro-based company said.
GE declined to comment on client agreements because of confidentiality requirements.
The payment delay is the latest sign of difficulties grinding business to a halt in the world’s ninth-biggest economy. Companies are struggling to get financing amid the deepest two-year recession in more than a century. Compounding the challenges for GE has been the slowdown of support for renewable energy. Jerome Pecresse, head of the company’s renewable energy business, said in June that Brazilian clients were in arrears and the country’s wind-power supply chain was at risk of collapse amid slowing turbine demand.
The former president of Queiroz Galvao’s construction unit, Ildefonso Colares Filho, was arrested in August. He faces charges on corruption, money laundering, criminal organization and attempting to obstruct investigators.
Federal police also raided in June the offices of a venture comprising Queiroz Galvao and OAS SA, which built facilities for the Summer Olympics that were held last month in Rio de Janeiro. Authorities said they found over-billing and falsification of receipts. The venture said the costs were justified.
GE is facing further disruptions to its Brazil operations from Renova Energia SA, which is trying to renegotiate supply deals, according to the two people who’d been briefed on the matter. The Brazilian renewable-energy company may cancel its GE contracts, they said. Renova didn’t respond to requests for comment.
Renova has cut staff and hired consultants at Accenture Plc to come up with a restructuring plan after SunEdison Inc. canceled a $250 million deal to buy a 16 percent stake in the company. SunEdison filed the biggest U.S. bankruptcy of the year in April. Its TerraForm Global Inc. yieldco pulled out of an agreement in December to buy shares in Renova units with about 2.2 gigawatts of power assets.
Renova canceled power purchase agreements for 676 megawatts of wind parks in Bahia state to “improve liquidity,” it said in a statement in June.