Local debt market poised to become viable funding source again

The local debt market is likely to show growth in 2017 and become a source of funding for companies again, after last year’s drought. With falling interest rates, companies begin to see positive effects both on their debt cost and in their bottom lines and banks start lending to smaller and riskier businesses.

Felipe Wilberg

Experts who structure debt sales expect the pace to continue strong for tax-exempt securities, meant for individual investors, and to improve for corporate debt, focus of institutional investors. “The year will begin strong, especially for tax-exempt securities. Our expectation is that we will have maintenance or marginal growth in the issuance of certificates of agribusiness receivables [CRAs] and we have a long pipeline of infrastructure bonds, especially for the power industry,” says Joel Schimchak, head of debt issuance at Santander.

Banco do Brasil in Talks to Arrange 9 Billion Reais Dam Loan - Bloomberg.com

Banco do Brasil in Talks to Arrange 9 Billion Reais Dam Loan
Jan. 13 (Bloomberg) -- Banco do Brasil SA, Latin America’s largest lender by assets, has begun talks with banks and companies to arrange a loan of about 9 billion reais ($5.1 billion) to help finance construction of an Amazon dam project.

The bank is negotiating with five to six banks and with companies that may bid to build the Belo Monte hydroelectric dam, Sandro Marcondes, Banco do Brasil’s commercial director, said in a telephone interview from Brasilia. The companies include GDF Suez, Camargo Correa SA, Odebrecht SA, Cia. Energetica de Minas Energia, Neoenergia and Centrais Eletricas Brasileiras SA units Chesf and Eletronorte, he said.

“We are working with companies and Brazil’s state development bank to identify risks associated with the project,” Marcondes said.

BNDES, as the country’s state development bank is known, may also provide 12 billion reais in financing for the project, Marcondes said. Banco do Brasil estimates the 11,000-meagawatt hydroelectric dam may cost about 26 billion reais. The bank doesn’t have a final estimate for the project as Brazilian government hasn’t set the auction rules.

The state development bank will announce the terms of financing once the government sets the auction date, said a BNDES spokesman who declined be identified in accordance with the bank’s policy.

Dam Projects

Brazil will set the auction date for the Belo Monte dam after environmental agency Ibama grants a permit, Energy Minister Edison Lobao said in December. Ibama hasn’t said set a date to announce the license, said spokeswoman who declined to be indentified in accordance with agency policy.

Last year, BNDES lent 6.1 billion reais to a group of companies led by Odebrecht to build Jirau and 7.2 billion reais to GDF Suez and its partners for the construction of the Santo Antonio dam.

Odebrecht is considering bidding in the Belo Monte auction, a company’s spokeswoman said. Spokespeople at Eletrobras, as the Chesf and Eletronorte controlling shareholder is known, Cia. Energetica de Minas Energia, GDF Suez and Camargo Correa didn’t return calls seeking comment from Bloomberg News. A Neoenergia spokeswoman declined to comment.

To contact the reporter on this story: Francisco Marcelino in Sao Paulo at mdeoliveira@bloomberg.net
Last Updated: January 12, 2010 21:00 EST

Paraguay-Brazil Energy Treaty Going Nowhere Fast - NYTimes.com

Paraguay-Brazil Energy Treaty Going Nowhere Fast

ASUNCION, Paraguay (AP) -- It's been nearly five months since the presidents of Brazil and Paraguay agreed on a breakthrough deal to triple Paraguay's income from the world's second-largest hydroelectric dam, but the money won't be flowing anytime soon.

The treaty would increase Paraguay's income from energy generated by the Itaipu dam on the shared Parana River to $360 million, money that Paraguay's President Fernando Lugo wants to spend on agrarian reform to benefit 300,000 landless peasant families.

It also calls for Brazil to invest in high-capacity power lines across Paraguay, creating an energy grid that could help one of South America's poorest countries reshape its agricultural economy.

The treaty, signed by Lugo and Luiz Inacio Lula Da Silva on July 25, was quickly approved by Paraguay's congress, but lawmakers in Brazil have yet to move the plan out of the first of four committees due to consider it -- partly because what Brazil mostly gets from the deal is good relations with its poorer neighbor.

''It is controversial. It's not a simple matter, because it carries more benefits for Paraguay than Brazil,'' Brazilian Rep. Severiano Alves, a member of the lower house's foreign relations committee, told The Associated Press.

He said both houses of Congress would probably vote on it in the first half of 2010.

Carlos Mateo Balmelli, Itaipu's Paraguayan director, has lobbied for the agreement, but Alves says Brazil should not be pressured.

''They didn't pay anything to build the dam -- they just provided territory and water from the river. Brazil was the one that assumed the cost of financing Itaipu,'' Alves said.

Itaipu's 20 huge turbines generate electricity divided equally between the neighbors, but Paraguay's much smaller population and economy consumes the energy of only one turbine. The current treaty forces Paraguay to sell its excess capacity to Brazil until 2023, without the possibility of selling the energy elsewhere, at far less than market prices.

The new treaty would increase Paraguay's income from $5.10 to $15.30 per megawatt/hour for excess power sold to Brazil. Lugo said the proposal has already succeeded in overcoming Paraguay's

isolation, a legacy of Alfredo Stroessners 1954-1989 dictatorship.

The existing treaty was signed in 1973, before the dam was built. Both countries took on loans to build it -- debt that now totals $17 billion. But Paraguay doesn't recognize $8 billion of it because it considers the debt to be illegally obtained by corrupt officials of the former government.

------

Associated Press Writer Marco Sibaja in Brasilia, Brazil contribued to this story.

By THE ASSOCIATED PRESS

Published: December 16, 2009

Spain's Elecnor to build 96 MW wind parks in Brazil | Markets | Reuters

Spain's Elecnor to build 96 MW wind parks in Brazil

MADRID, Dec 15 (Reuters) - Spanish energy firm Elecnor (ENOR.MC) on Tuesday said it had won a contract worth 183 million euros ($266.1 million) to build five wind parks in Brazil.

The company added in a statement that the parks in the southern Brazilian state of Rio Grande do Sul would have a total generating capacity of 96 megawatts. (Reporting by Tomas Gonzalez; Writing by Martin Roberts)"

BTG to create Brazil infrastructure fund-executive | Reuters

BTG to create Brazil infrastructure fund-executive

SAO PAULO, Dec 11 (Reuters) - BTG Pactual, the securities firm led by Andre Esteves, is set to launch a private equity-backed Brazilian infrastructure fund, to take advantage of massive road, port and dam projects, a senior executive said.

Private Capital

'With expectations of growth coming around 5 percent next year, the need for infrastructure investment will be huge,' Eduardo Cutolo, an executive director at Sao Paulo-based BTG Pactual, told reporters late on Thursday.

Private equity investment is expected to grow next year as the country's growth prospects and declining interest rates draw a new class of risk-hungry investors.

Brazil makes up for about half of Latin America's gross domestic product and in the past four years represented 45 percent of all private equity investments in the region, according to Emerging Markets Private Equity Association data.

Cutolo did not give details on the terms or size of the fund.

Esteves and his partners sold Rio de Janeiro-based Pactual to UBS AG (UBSN.VX) in 2006 and later became global head of fixed-income, currencies and commodities at the Swiss bank. He formed BTG last year with some of his former partners at Pactual.

Less than four months after quitting his UBS job in 2008, Esteves and his partners in BTG moved to buy Lehman Brothers Inc.'s Brazil unit to expand its trading muscle. BTG bought back Pactual from UBS for about $2.5 billion in a deal concluded in September this year.

The bank aims at taking up the slack left by global investment funds and banks that had to flee emerging markets amid the worst financial crisis in eight decades. Cutolo reiterated that BTG Pactual wants to become the largest emerging markets-based securities firm in a few years. (Reporting by Aluisio Alves; Writing by Guillermo Parra-Bernal; editing by Simon Jessop)

Brazil's Belo Monte Not Seen As Essential To Energy Demand - WSJ.com

SAO PAULO (Dow Jones)--Brazil's lights will stay on whether or not the planned Belo Monte hydroelectric dam ever sees the light of day, some top sector analysts said Monday.
'Our view is that Brazil will not lack power supply if Belo Monte does not get built because thermoelectric power companies and wind power will be available to meet demand,' said Marcos Severine, a senior analyst at Itau Securities in Sao Paulo.

The drama over the 11,000 megawatt power station has many local pundits saying that Brazil will not meet energy demand right around the time the nation hosts the World Cup in 2014 and the Olympic games in 2016.

Although Brazilians are notorious for talking their country into a catastrophe, Walter Vitto, an industry consultant at Tendencias in Sao Paulo, said where Belo Monte fails, coal and natural gas will find their niche.

'We are not going to be facing the chaotic rolling blackouts we faced in 2000 and 2001,' he said. Back then, the government was reining in spending and private energy companies were not investing in expansion due to uncertainties over the new, regulated energy market policies being created at the time.

'There is certainly the risk that hydroelectric power won't be able to meet demand, but then the new natural gas, wind and coal fired plants will be able to make up for it,' Vitto said.

The Belo Monte dam was supposed to be auctioned off to bidders in December but that has been postponed because the environmental protection agency, Ibama, has not yet signed off on the project.

The dam will be Brazil's second largest power station behind the Itaipu dam in the south, which has installed capacity to generate 14,000 megawatts of electricity.

Later this month, the government will hold the so-called A-5 energy auction. The auction, designed to meet energy demand in five years' time, is dominated by natural gas and coal-fired power companies.

Nearly 80% of Brazil's electric power comes from hydroelectric dams.

-By Kenneth Rapoza, Dow Jones Newswires; 5511-2847-4541; kenneth.rapoza@dowjones.com"
Brazil's Belo Monte Not Seen As Essential To Energy Demand