Brazil Seeks $5 Billion Peru Energy Pact, Lobao Says

Brazil aims to reach an accord with Peru by March on a $5 billion power project to secure energy supplies as economic growth picks up, a minister said.

The governments plan to build five hydroelectric plants in Peru that will produce 6,000 megawatts of electricity, Brazilian Energy Minister Edison Lobao said. Peru will supply surplus power to Brazil, which needs to boost its generating capacity by 50 percent in 10 years, according to the Energy Ministry.

“Installing the first 2,000 megawatts will cost around $5 billion,” Lobao said in a Dec. 11 interview in Lima. “The long- distance transmission of energy to Brazil is a very costly operation.”

Centrais Eletricas Brasileiras SA, Latin America’s largest utility, will help build the five plants in the foothills of the Peruvian Andes as Brazil seeks increased electricity output to spur faster economic growth. Peru could harness the “enormous” power of its rivers to produce 90,000 megawatts of electricity annually for export to Brazil and other countries in the region, according to Peruvian President Alan Garcia.

“Peru loses in a year as much hydroelectric energy as Brazil consumes annually,” Garcia said at a Dec. 11 meeting with Brazilian President Luiz Inacio Lula da Silva. “This is a clean, renewable and infinite source of energy.”

Transmission Lines

The new plants will supply electricity to cities in Brazil’s Amazon jungle such as Rio Branco through a proposed 1,500- kilometer (932-mile) transmission line, Lobao said. Peru will also supply electricity to other parts of Brazil through 4,000 kilometers of transmission lines, he said.

Eletrobras SA, as Brazil’s state-owned utility is known, plans to complete a feasibility study on a first plant this month, said Sinval Zaidan Gama, head of the company’s international operations. The 2,000 megawatt Inambari project in Peru’s southern Amazon jungle would take Eletrobras and partners Furnas Centrais Eletricas SA and Construtora OAS Ltda five years to build. Studies on the other four hydroelectric plants will be completed in December 2010, Gama said.

Eletrobras will contribute $2 billion for a 49 percent stake in Inambari if it goes ahead with the project, Gama said. The company is studying investments outside Brazil that could provide a return for shareholders, he said.

“Electricity production costs in Peru are quite low,” Gama said in a Dec. 11 interview in Lima. “Other countries also offer good opportunities cost-wise, such as Uruguay, Guyana, Costa Rica, Mozambique, Nepal and China.”

Competition

Competitive construction and energy generation costs are luring investors to Peru, according to Cesar Luiz de Godoy Pereira, a director at Sao Paulo-based Alusa Holding, which plans to spend $1 billion to build three power plants in Peru. It costs 50 percent less to build hydroelectric plants in Peru than other countries in the region such as Brazil and Chile, Pereira said.

“Peru has great potential as an electricity producer and supplier to Brazil and Chile,” Pereira said in a Dec. 11 interview in Lima. “Peru’s waterfalls make hydropower much easier whereas in Brazil you have to build dams.”

Peru’s government wants to lever the Andean country’s energy advantage to attract investment in industries that can use Peru’s free trade accords by exporting their products to China and the U.S., Pereira said.