Transmission rates threaten Candonga

Construction of the 140MW Candonga hydroelectric project that Brazilian conglomerate CVRD and aluminum company Alcan Aluminio do Brasil are building on the river Doce in Minas Gerais state could be frozen because of high transmission rates, news agency AE Setorial quoted Alcan's energy director Claudio Campos as saying. "It's cheaper to leave it unconnected and buy energy on the market." Investment in the project, scheduled for completion in January 2004, has already reached US$110mn. Alcan wants transmission rates lowered to reflect Candonga's status as a self-supply project rather than an independent power production plant. The company wants the government to come up with a solution, but failing that has not ruled out selling the project, Campos said. "We don't want cheap power, we want a fair transmission rate." Alcan has told large-scale consumers' association Abrace and aluminum association Abal of the situation but has yet to receive a reply. Transmission rates are also casting doubt on the US$120mn, 155MW Cacu-Barra dos Coquieros hydro project in Goias state, where construction was scheduled to start in 2004 for completion in 2007. "Our owners do not want to take this project forward under the current conditions," Campos said. The lack of an environment project is a further problem. "We don't know what could happen to Brazil's aluminum sector if the power sector rules continue as they are." Faced with so much uncertainty, Alcan has recently opted to buy peak-time power at auctions rather than develop its own generation facilities. Nonetheless, the company aims to generate 25% of its own 2.3GWh power requirements from 2004 through Candonga and eight small-scale hydroelectric projects.