Eletrobras goal is to provide 11% return

Federal energy holding company Eletrobras aims to provide a return of 10-11% on capital, the company's president Luiz Pinguelli said at Electric Power and Society seminar in Rio de Janeiro on September 15. "Compensation of public sector-owned should be less than private capital. We invest because of obligation, while the private sector invests to obtain profits and attract capital," he said. "We provide a lower return but our investments also offer lower risks," he said. The head of Eletrobras criticized the energy model drawn up under the administration of Brazil's previous president Fernando Henrique Cardoso. "The private sector is not investing in electric power because it only wanted to acquire assets. It didn't have any more firepower to invest because it wanted a return of 15-20%," Pinguelli said. The private companies, he said, also made risky investments and must take the responsibility for their actions, which include hefty liabilities in US dollars, instead of passing on the mistakes to consumers. Eletrobras is investing a total of 3.5bn reais (currently US$1.21bn) this year, plus administering another 4bn-4.5bn reais in sector funds such as rural electrification projects among others. The holding is using its own resources for the investments while paying out dividends of 1bn-2bn reais to state and federal governments as well as other shareholders. Once increased demand comes closer to supply in some five years, investments in new capacity by the sector as a whole will reach 12bn-15bn reais a year, Pinguelli said. The estimate is based on supply having to grow 5% a year, or 3-4GW, and a cost of expanding capacity by just under US$1000/KW, which translates into US$4bn/year.