25/03/2010
Belo Monte: External funding may be decisive
From Sao Paulo
11/03/2010 What could be a disadvantage for the Chinese in the race for the supply of equipment supply for the Belo Monte plant – the loan from BNDES, which finances only equipment produced in Brazil – can turn in favour for China. If the Brazilian national development bank is not capitalized, it will not be able to provide funding for 80% of the total to be invested in the work. Thus, the way out for the consortium hoping to win the auction could be to sign on the Chinese, who in their package include the financing of equipment through the Chinese Eximbank. Last year, when the Energy Research Company (EPE) announced that the total investment of Belo Monte would be $ 16 billion, BNDES also said it would finance up to 80% of the work. But the bank, bound to the rules of Basel, has a limitation to loan to a single enterprise, which is $ 12 billion. The value already represented only 75% of investments. As the total number was revised, by the EPE, and should reach $ 20 billion, without the bank’s capitalization it will not be possible to fulfill the promise of funding up to 80%. Not to mention that the estimate of the contractors is to spend more than $ 20 billion. The Bank was contacted, but until the closing of this issue has not given response. One member of a consortium tells of the fact that without a clear position regarding the capitalization of the bank until the auction, the price conditions for the race are completely changed. Even if a Brazilian bank is willing to replicate the conditions of BNDES financing, as a transfer agent, it will charge more expensively for maintaining a funding of this size in its loan portfolio for 30 years. That is why the Chinese can earn extra competitiveness in this race, as they are willing to finance the supply contract which represents a third of the total value of the total expense of $ 20 billion. The idea of buying foreign products and take all the funding in one package attracts some companies so much that they came knocking on the door of Aneel (the national Energy Agency) proposing an unusual feature: link 20% of energy sold to the dollar, in order not to incur in the costs of hedging. That would mean that part of the tariff would be adjusted by the dollar, as is the energy from Itaipu. The idea was rejected by Aneel. (JG)
11/03/2010 What could be a disadvantage for the Chinese in the race for the supply of equipment supply for the Belo Monte plant – the loan from BNDES, which finances only equipment produced in Brazil – can turn in favour for China. If the Brazilian national development bank is not capitalized, it will not be able to provide funding for 80% of the total to be invested in the work. Thus, the way out for the consortium hoping to win the auction could be to sign on the Chinese, who in their package include the financing of equipment through the Chinese Eximbank. Last year, when the Energy Research Company (EPE) announced that the total investment of Belo Monte would be $ 16 billion, BNDES also said it would finance up to 80% of the work. But the bank, bound to the rules of Basel, has a limitation to loan to a single enterprise, which is $ 12 billion. The value already represented only 75% of investments. As the total number was revised, by the EPE, and should reach $ 20 billion, without the bank’s capitalization it will not be possible to fulfill the promise of funding up to 80%. Not to mention that the estimate of the contractors is to spend more than $ 20 billion. The Bank was contacted, but until the closing of this issue has not given response. One member of a consortium tells of the fact that without a clear position regarding the capitalization of the bank until the auction, the price conditions for the race are completely changed. Even if a Brazilian bank is willing to replicate the conditions of BNDES financing, as a transfer agent, it will charge more expensively for maintaining a funding of this size in its loan portfolio for 30 years. That is why the Chinese can earn extra competitiveness in this race, as they are willing to finance the supply contract which represents a third of the total value of the total expense of $ 20 billion. The idea of buying foreign products and take all the funding in one package attracts some companies so much that they came knocking on the door of Aneel (the national Energy Agency) proposing an unusual feature: link 20% of energy sold to the dollar, in order not to incur in the costs of hedging. That would mean that part of the tariff would be adjusted by the dollar, as is the energy from Itaipu. The idea was rejected by Aneel. (JG)
