Why Brazil wants to suspend agreement with Âmbar Energia

Brazil’s federal attorney general's office (AGU) sent a note to the mines and energy ministry (MME) requesting the suspension of an agreement signed between the federal government and Âmbar Energia as it is allegedly damaging to the public interest. 

Signed in May, the agreement outlines the replacement of thermal plants contracted in the emergency auction held in 2021 at the height of the water crisis, but not delivered, with a contract for the Cuiabá thermal power plant and the payment of a 1.1bn-real fine (US$200mn) by Âmbar. 

AGU's move complied with a request made by federal audit court TCU based on the suspicion that public authorities had signed the agreement to benefit the company, undermining equality with other firms in the sector and damaging electricity consumers.

The agreement stipulated that it would only go into effect 60 days after it was signed (from July 22) and stated that, during this period, if the TCU made any notes, recommendations or reservations to the text, it would be suspended until the problem identified by the audit court is remedied.

Called the simplified competitive procedure (PCS), the 2021 auction was held by electric power watchdog Aneel amid supply problems due to a severe drought that led to the lowest availability of water for hydroelectric generation in nearly a century.

The tender offered higher revenues than the average seen in the supervisory body's bidding processes, but with the condition of a short deadline for the completion of the gas-powered projects.

The original deadline for these developments to begin commercial operations was May 1, 2022, but several projects were delayed, leading to fines of more than 1.7bn reais.

Subsequently, in October 2022, the MME launched a public consultation to discuss a proposal to cancel the power generation contracts signed in the tender.

Last year, minister Alexandre Silveira said the government would negotiate flexibility in the thermoelectric generation of the plants contracted in the auction if there was no agreement with the owners of the projects. 

ÂMBAR ENERGIA

Âmbar is an energy company owned by J&F Investimentos, the holding company controlled by powerful and controversial businessmen Joesley and Wesley Batista, which also controls firms such as meatpacker JBS and pulp producer Eldorado Celulose. 

The Batistas were investigated by the federal police as part of the Lava Jato probe for allegedly paying bribes to politicians. The graft scheme was revealed by the two men under a plea bargain agreement signed with the federal prosecutors' office PGR.

In May, the brothers met President Luiz Inácio Lula da Silva for the first time since signing the plea bargain deal, during talks with the local meat exporters (ABIEC), animal protein (ABPA) and meatpacking associations. 

Âmbar has substantially expanded its business in the country. After acquiring Copel's Araucária thermoelectric plant and Engie's Lages cogeneration plant in December 2023 and this May, respectively, it bought 13 gas-fired assets from Eletrobras in June. 

The company is considering registering the Araucária plant and other projects to take part in the backup capacity tender due to be held by the government in August. 

Its power generation portfolio currently totals 4.6GW of installed capacity, including thermal, hydroelectric, solar and a biogas plant. 

According to a report by newspaper Folha de São Paulo, Âmbar recently submitted a proposal to Aneel to take control of Amazonas Energia, the electricity distribution concessionaire in Amazonas state sold by Eletrobras to the Oliveira Energia consortium, part of the Atem group, in 2018. 

Âmbar's energy trading arm, Âmbar Comercializadora de Energia, is one of the three companies authorized by the MME to import electricity from Venezuela, an operation that is still under negotiation.