Brazil’s plan to build at least five nuclear power plants over the next two decades may run into a financing problem as federal budget constraints limit spending by government-controlled utility Centrais Eletricas Brasileiras SA.
The company known as Eletrobras, which is in the process of building Angra 3, a 9.5 billion Brazilian real ($5.1 billion) reactor that will have a capacity of 1,400 megawatts when it’s completed in 2015, said last week it signed an agreement with the national energy research corporation to study sites for additional nuclear reactors.
Yet there are a number of financing obstacles which Eletrobras must clear to be able to get any construction underway.
“These nuclear projects take a long time to get off the drawing board and generate a lot of controversy, so they’ll likely be last in line to receive financing,” said Rosangela Ribeiro, analyst at brokerage SLW in Sao Paulo. Under current circumstances “it’s very difficult to find resources for this,” Ribeiro said.
Brazil’s energy matrix is unique given that hydroelectric dams currently generate more than 90% of the country’s energy. Three huge new dams are expected to come online in the next five years, including the $17 billion, 11,200 megawatt Belo Monte dam, slated to be the world’s third-largest when it’s completed.
But with potential dam sites expected to be exhausted in two decades, Brazil must begin looking for new sources of energy to feed its ambition to become the world’s fifth-largest economy.
Nuclear power is the second-largest source of power in Brazil, and Eletronuclear, Eletrobras’s nuclear unit, has generated 3.4% of the country’s electricity this year, from its two nuclear plants in Rio de Janeiro state.
In addition to Angra 3, at least four plants are in the works as part of Brazil’s 2030 national energy plan, at an expected cost of $10.3 billion.
One possible impediment to fulfilling its investment goal is Eletrobras’s inclusion in government fiscal targets. Many state-controlled companies contribute to the primary budget surplus, which limits their ability to take on debt and increase investment.
Eletrobras’s investments account for practically all of the government’s deficit of BRL1.96 billion so far this year, the local Estado news agency reported Aug. 4. With Eletrobras planning to spend BRL9 billion this year, it will be hard for state-owned enterprises overall to produce the surplus of 0.2% of gross domestic product laid down in the budget. Cuts have already been made to next year’s budget.
“The government cut our BRL3.1 billion budget for 2011, so now we’ll have to work with just BRL1.8 billion next year,” said Roberto Travassos, manager of planning and budget at Eletronuclear. “We’re talking to Eletrobras and the Ministry of Mines and Energy to recover our budget in order to not put deadlines for start-up of operations at risk.”
State-controlled oil company Petroleo Brasileiro SA (PBR) was removed last year from the surplus target in order to free it up to carry out its $224 billion five-year investment plan, and Eletrobras has requested a similar move for itself.
The expiration of operating concessions in 2015 and the possibility that Eletrobras won’t be able to renew those contracts may throw the company’s balance between revenue and investment even further out of balance, analysts said.
Even if Eletrobras is excluded from the surplus calculation and is allowed to spend at will, sources of financing may be cut back. Development bank BNDES would be considered an essential source for Eletrobras, but the government lender has been criticized recently as a parallel source of funding for Brazilian President Luiz Inacio Lula da Silva’s pet projects.
BNDES has lent out BRL134.9 billion in the past 12 months, a 12% increase from the year-earlier period.
Another option, bringing in private-sector partners, could run into problems because of the government monopoly on nuclear facilities, said Drausio Atalla, supervisor of new projects at Eletronuclear. Brazil’s constitution says use of “nuclear facilities” is the exclusive right of the federal government.
In an effort to make the rules clearer for the private sector, Lower House representative Alfredo Kaefer proposed an amendment that would allow the government to grant concessions for companies outside the government to operate nuclear power plants.
The amendment, introduced three years ago, likely won’t be voted on this year, Kaefer said. It would limit participation in future nuclear generation projects to Brazilian companies, though that may be revised in future versions of the proposal, he said.
