Petrobras agrees to buy Termoceará for US$137mn

Brazil's federal energy company Petrobras (NYSE:PBR) has agreed in principle to buy the 220MW natural gas-fired Termoceará plant from Brazilian power and mining group MPX for around US$137mn, Petrobras said in a statement. MPX confirmed the negotiations and terms when contacted by BNamericas. Termoceará is in the northeastern state of Ceará and is fully owned by MPX. Talks should be concluded in three months and if an agreement is reached both sides will end legal and arbitration disputes over the power plant, Petrobras said in the statement. Petrobras took MPX to an arbitration court recently after failing to stop in local courts a revision of a contract signed with MPX in 2001 under which it has to make payments of around 14mn reais (US$5mn) a month if the power plant does not sell enough power to cover operational costs. The possible acquisition of Termoceará is part of Petrobras' strategy to reduce losses from power operations resulting from several contingency payment clauses included in contracts signed when the government wanted to guarantee a quick increase in power supplies during the 2001-2002 electricity shortage caused by drought. Under the contracts, Petrobras would guarantee the supply of natural gas and would ensure revenue in case the power plants do not sell or produce enough power to cover operational costs. Petrobras resorted to seeking court rulings to stop payments after talks over the sale of the power company stalled. MPX wanted US$170mn for Termoceará, but Petrobras was then offering US$127mn through 15% discounts on monthly payments in exchange for control of the power plant when the contract expires in 2008. Petrobras is in similar negotiations with US energy company El Paso for the acquisition of its 680MW Macaé gas-fired plant in Rio de Janeiro state. MPX is made up of Brazilian investment group EPX with 51% and US mining and power group MDU Resources with 49%.