Brazil hydro operator plans to build six small plants

Brazilian hydropower generator AES Tiete S.A. plans to build six small projects in its reactivation of a program of investment in small hydropower.

In its report of 2006 results, AES Tiete said March 6 it plans to invest 22.4 million reais (US$10.68 million) in 2007 to build three small hydropower plants totaling 8 MW on the Jaguari Mirim River in Brazil's Sao Paulo State.

Additionally, the company said it signed a license purchase and sale agreement in October 2006 for the exploitation of water resources to enable construction of three hydro plants totaling 52 MW in Rio de Janeiro State. Subject to approval of Brazilian regulator Agencia Nacional de Energia Eletrica (ANEEL), AES Tiete plans to invest 225 million reais (US$107.2 million) over two years for construction of the three plants by its subsidiary AES Rio PCH Ltda.

AES Tiete, which operates 10 hydroelectric projects totaling 2,651 MW, plans to spend another 53.1 million reais (US$25.3 million) in 2007 to upgrade and restore existing facilities. Notably, it plans to complete capacity restoration and upgrading of Unit 3 of its Bariri hydro plant and Unit 2 of its Promissao plant, both on the Tiete River. It also plans to invest in reforestation of project lands.

The company invested 46.5 million reais (US$22.18 million) in capital expenditures in 2006, a growth of 69.1 percent over 2005, mainly due to reactivation of the small hydro program.

Investments in 2006 included another 19 million reais (US$9 million) to restore Unit 2 of Bariri, which was completed in July 2006, and to begin work on Unit 3, which started in August.

Other rehab investments in 2006 included: 2.5 million reais (US$1.19 million) for automation of the Limoeiro project on the Pardo River; 2.6 million reais (US$1.2 million) for a new transformer for Unit 3 of the Nova Avanhandava project on the Tiete River; and 2 million reais (US$953,620) for new voltage regulators of three units at the Agua Vermelha project on the Grande River.

AES Tiete seeks suspension of capacity expansion requirement

Caught between an obligation to expand generating capacity and new government regulations limiting its ability to expand, AES Tiete said it is seeking government permission to suspend the expansion requirement while it assesses its options.

AES Corp. of the United States acquired the hydropower project operator in 1999 in a privatization spinoff by utility Cia Energetica de Sao Paulo. A requirement of that privatization was that AES Tiete should expand its installed capacity by at least 15 percent -- 400 MW -- within eight years.

The expansion requirement called for AES Tiete to increase its installed capacity in Sao Paulo State or to purchase energy from new power plants built within the state.

However, AES Tiete said the national government's New Model for the Electricity Sector imposed new regulations preventing it from building thermal generation. It added that remaining hydro potential in the state is insufficient. Additionally, the new rules restrict its ability to buy power from new plants built by third parties.

The company said it asked Sao Paulo State and ANEEL for permission to suspend the expansion requirement for five years while it examines project investments regardless of their location. It also asked that it be exempted from the requirement if, after five years, it is still prevented from acting by the national regulations.

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