Anatalicio Risden has to come to an agreement with the neighboring country to define the power plant’s budget for 2022
03/07/2022
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Anatalicio Risden Junior — Foto: Sara Cheida/Itaipu Binacional
Without consensus on the power tariff for the Brazilian and Paraguayan markets, Itaipu Binacional power plant still has no defined budget for the year 2022. Facing the impasse between the Brazilian and Paraguayan boards, Admiral Anatalicio Risden Junior takes over the command of the company with the mission of sitting at the table with the Paraguayans — who own 50% of the company — to negotiate the new hydroelectric power plant tariffs.
The challenge will not be easy. The part of the electricity that Paraguay does not use, according to the Itaipu Treaty, must be sold to Brazil, and in this assignment the neighboring country has always been hardline when it comes to changing tariffs. This should have been approved since October of last year, but there is still no agreement on reaching a base.
This is not new. Past administrations have also had difficulties. Until this happens, the plant uses a provisional tariff from the previous year, which is $22.60 per kilowatt, a value frozen since 2009. As any buyer, Brazil, obviously, is interested that the value falls. The executive’s strategy will be to maintain the policy of good neighborliness in the negotiation with the Paraguayans to define the budget of the state-owned company, as well as to carry out a series of structural works in progress. In his first interview since taking office, Mr. Risden says that the negotiations are underway, but without any further definition.
“What we have to do, and this is a point that Minister (of Mines and Energy) Bento Albuquerque and President Jair Bolsonaro put to me, is to maintain the dialogue without losing the bases that Brazil needs. This is the exercise that I have been doing together with the Paraguayan director-general of trying to find a solution in which I can bring the least possible impact to the Brazilian consumer and at the same time have a viewpoint of the Paraguayan problem”, he said.
Mr. Risden is familiar with the business — as he has been working at the company since 2019, when he held the position of chief financial officer. Now as Brazilian CEO, he hopes his time there will be marked by a practice of market management, prioritization of business cost reduction, and planning for the medium and long term.
“To calculate the tariff, which is how much the Brazilian and Paraguayan consumer pays us, there are four elements. One is the budget base. We were able to define all the other elements, but we couldn’t reach an agreement with the budget base. We are running the company without a pre-placed budget.”
Another goal will be to continue a management marked by austerity and major works. The review of contracts and agreements resulted in resources for structuring works, such as a new bridge between Brazil and Paraguay, and the revitalization of the Furnas transmission system to make it more robust, among others. In all, there are about R$2.6 billion invested.
In 2021, the company completed the payment of $600 million for part of the debt, and operating expenses fell. With this, there is the possibility of reducing the tariff value of the plant in the same proportion. All that remains to be done is to agree with the Paraguayans. “What I defend is the lowest cost for the Brazilian consumer. The point is that we are partners in a company and we have to negotiate, and this is what is happening,” he says.
Another of Mr. Risden’s missions will be to assist Brazilian diplomacy in the negotiations on Annex C of the Treaty, which establishes the financial and electricity service provision bases of the binational company. With just over a year to go until the Itaipu Treaty turns 50 years old, the negotiations for the revision of Annex C are with the Foreign Office, known as Itamaraty.
Time is pressing and the date that marks this turning point between the neighboring countries on the company’s financial bases will be April 26, 2023, when the countries will be able to adjust it to current reality, and the plant’s construction debt will be practically zeroed, which will bring the contracting cost to a lower level.
“We have to move towards a market model,” he defends. “The difficulty is that our partner’s integrated power system is far behind ours. They have only one company, Ande [Paraguay’s state-owned company], which does everything,” he adds.
Half a century after it was created, Itaipu is still a key piece in the power security chessboard of both countries. The hydroelectric plant has 14 gigawatts (GW) of installed power, accounts for 8.4% of all the electricity consumed in Brazil and 85.6% of Paraguay’s power. Even though it is the second largest in the world in installed capacity, the binational power plant holds the title of largest power generator on the planet, having produced more than 2.8 billion MWh.
It will be difficult to balance these interests. The Brazilian diplomacy is trying to convince the Paraguayans to give in the negotiations, especially in relation to the price of Paraguayan electricity sold to Brazil. The expectation is that both countries will benefit from Itaipu’s power generation without paying construction costs that represented more than half the price of the company’s power.
Source: Valor International