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More Brazil projects but no construction -- Regulatory uncertainty

Brazil's electricity regulator Aneel has authorised SIIF Energies do Brasi to build a further five wind projects, totalling more than 300 MW, in Ceara state, part of the country's famously windy northeast. SIIF Brazil is a subsidiary of French SIIF Energies, which runs the renewables development unit of utility Electricité de France.

The projects -- Bom Jesus (55.8 MW), Gameleira (27 MW), Fortim (93.6 MW), Foz do Rio Choro (25.2 MW) and Praia Formosa (104.4 MW) -- bring SIIF's basket of Aneel authorised wind projects to some 1500 MW in 12 locations. The latest projects are all due to start operations by December 1, 2004.

Despite the approval and in some cases the completion of detailed wind studies, the company has not started any construction because of continuing regulatory uncertainty, says SIIF do Brasil president Henri Baguenier. "We are in a transitory period and time investment decisions are obviously frozen," he says.

Uncertainty abounds. In early May authorities announced a new, but temporary, flat rate "normative value" (VN) -- the value at which generators sell to distributors -- of BRA 72/MWh ($26.76/MWh), replacing the previous system of eight different VNs that varied depending on the generation source. A new and definitive VN was expected at the end of last month, but until then sector players consider the temporary BRA 72 price will make efficient hydro generation about the only power source that could operate profitably.

Apart from the pricing, the government is drawing up a power sector revitalisation program that should be ready for implementation in September, just one month before presidential elections, after which the sector could be overhauled once again. The program's 33 measures would introduce regulatory change in just about every aspect of the sector, and the main 11 features are up for public consultation through mid-July.

Despite the situation, "We are confident some positive moves will come," Baguenier says "or else we wouldn't be requesting permits." SIIF has contracted two companies to scout for sites in the northeast and in early May presented Aneel with requests for a further 400 MW in four or five projects. "The northeast is great, you have good wind and land," he adds.

Talks with suppliers

Once SIIF gets the regulatory guarantees it is looking for, it will be able to proceed with construction. The first project will be Pecem, in Ceara state, where all studies and permits are in place and where SIIF is finalising talks with a number of manufacturers, Baguenier says. It is also in final talks with two or three candidates for an "engineering procurement and construction" contract, he adds. According to Aneel's December 2001 authorisation for the project, its capacity is 31.2 MW and it is scheduled to be operating by July 31.

Aneel also authorised Enerbrasil Energias Renovaveis do Brasil to build one project, Paraiso Farol (102 MW), at Touros in Rio Grande do Norte state. Operations are scheduled to start by October 31, 2003.

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