Tractebel eyes projects in H2 generation auction

The Brazilian subsidiary of Belgian group Suez-Tractebel is considering bidding on new generation projects in the government's upcoming power auction for about 2,800MW of new installed capacity, Tractebel Energía CFO Marc Verstraete told BNamericas. The government plans to hold the auction in the second half of this year and Tractebel's future investments in the country "will depend on the auction's success," Verstraete said. Tractebel has also registered to sell 690MW of guaranteed power from its existing plants at the auction. The projects and existing plants included in the auction are those awarded concessions since January 2000 whose construction has not started or which do not have long-term sales contracts for all their power. The tender will give these projects a chance to deliver energy starting in 2008 or 2009. It is also considered to be a test of the new power sector rules recently implemented by the government. But before auctioning concessions for new generation capacity, the government plans to hold two auctions before the end of June to soak up excess power supply and allow distributors to buy all their power needs through 2016. Tractebel only sold a total 10MW at the existing power auctions held in December 2004 and April 2005, but most of its 6,200MW generation capacity has been sold in the non-regulated market through bilateral contracts. "We have practically all of our power contracted out [in the next few years]," Verstraete said. "So we may only need to sell some power for delivery in 2009." MAINTENANCE Tractebel plans to invest 50mn reais (US$20.5mn) this year in maintenance and upgrading of its existing generation plants, Verstraete said. The company will complete the 39.9mn-real turbine replacement at the UHE Salto Osório plant started last year and scheduled to last 50 months. In 2004, the company invested 28mn reais in maintenance. DEBT SALE Tractebel is looking to improve its finances by restructuring part of is foreign-currency debt. To that end, the company recently wrapped up a 200mn-real local debt issue with maturities of 5-6 years. The proceeds and some of the company's cash reserves were used to pay down US$175mn that matured on May 16. "Tractebel had to reduce its exposure to foreign exchange rate variations," Verstraete said. The appreciation of the local currency against the US dollar made it a good moment to sell the debt. The demand was three times what was offered, allowing the company to reduce the interest rates on its 6-year 140mn-real series and 5-year 60mn-real series, Verstraete said, adding the company does not need to sell any more debt this year. Tractebel Energía posted net profits of 66mn reais in the first quarter of 2005, up 36% from year-earlier results. "This year has been good, as was last year," Verstraete said. Suez-Tractebel has 80% of voting right shares in Tractebel Energía through its Tractebel EGI South America unit. Tractebel Energía produces power in Brazil's southern region and has installed capacity of 3,719MW, mostly from hydroelectric power plants.