Itaipu must serve development, says new director – 04/19/2023 – Market

The year 2023 is a milestone for the Itaipu binational power plant. The debt for its construction was settled in February, the treaty that brought Brazil and Paraguay together as partners in the project turns 50 this month, and it will be possible to renegotiate the financial terms that can redefine the structure for raising and spending the resources.

Even before this bilateral diplomatic review, the new general director of Itaipu, Enio Verri, has already announced changes on this side of the border.

The era of large works in Paraná with resources from the plant, he says, has its days numbered. It was bridges, roads, airport runway. However, a much larger number of municipalities will receive resources to implement socio-environmental projects with the hallmark of the government of Luiz Inácio Lula da Silva (PT).

“Itaipu was almost like a works secretariat for the state government. We are going to keep the commitments signed by the previous management, but we are not going to start new works”, says Verri, in an interview with Sheet.

“We intend to expand the concept of territory of Itaipu, married with federal government policies. Of course, we don’t need to make investments in Londrina, Maringá, Cascavel, richer cities. But the smaller cities, with the HDI [Índice de Desenvolvimento Humano] lower, they will be met”, he says.

This goal of placing the state energy company at the service of a socio-environmental mission, however, tends to frustrate the expectation of a cheaper electricity bill —the ambition of generations of plant managers and the energy sector in Brazil. The tariff negotiations in 2022 and 2023 already signal a tendency to guarantee extra resources, which is defended by Verri.

“In my opinion, Itaipu should maintain the current model, remembering that part of the model implies guaranteeing returns, not in the form of profits, but of other benefits, such as investments in innovation projects and socio-environmental public policies”, he says..

How was the tariff negotiation Itaipu this year? The previous management left the tariff at US$ 12 and you closed it at US$ 16. The fare was not $12.

This value was provisionally fixed and applied. It was provisional and one-sided. The government did not consult the Paraguayan partner. It was even a disrespectful decision, because Paraguay owns 50% of Itaipu.

It also caused a deficit in the company. Some distributors —it seems there were two— were already charging US$ 12.67 (about R$ 62.65 per kilowatt). To cover the hole, now that we closed the tariff US$ 16.71 (R$ 79.11). The impact on our cash flow will be between US$150 million (R$745 million) and US$160 million (R$794 million).

In the year 2022 the same thing happened. They applied a provisional value of US$ 18.97, which lasted until August, when the tariff was closed at US$ 20.75, but covered the difference for the whole year. The past management had to withdraw US$ 220 million from Itaipu to cover this other unilateral decision.

Itaipu’s tariff should only cover the cost for the plant to operate. The biggest bill has always been the debt to build the plant. The debt was paid in February. A study by past management pointed out that, without the debt, the tariff would be between US$ 10 and US$ 11. At the tip of the pencil, what is the value? By the calculation that was made, around US$ 12.67 per kW [kilowatts], but by the logic of Brazil. This would lead to a further reduction in energy prices. But Paraguay wanted to keep at US$ 20. It took a lot of negotiation to reach US$ 16.71.

Let’s go back to the year 2022. Brazil was unable to maintain the provisional tariff of US$ 18, but, according to experts, it was the correct amount. By accepting the US$20, an extra US$300 million was created, which is mainly used for public works. This year, the same thing happened — there will be resources that can be used in public works. Will your management maintain this dynamic? Yes, but with a difference. In the last four years, Itaipu’s investment capacity in the state of Paraná was concentrated in the area of ​​infrastructure. Itaipu was almost a secretary of works for the state government. We are going to keep the commitments and works signed by the past management, but we are not going to start new works.

In our management, these resources will be used in Itaipu’s mission — and what is Itaipu’s mission? In addition to producing clean and quality energy, it is to develop environmental, social and infrastructure policies.

We want to finish Unila, for example. The Federal University of Latin American Integration is paralyzed. We are going to work with other initiatives, such as the organization of family farming and fishing, recycling, gender and social policies aimed at generating jobs and income, hallmarks of the federal government.

Entrepreneurs from Paraná state that Mr. intends to restructure the division of resources. That is true? We intend to expand the concept of territory of Itaipu, married with federal government policies.

With the end of debt payments, Itaipu becomes strategic in Paraná. It maintains an environmental and social debt. It has been paying for it through royalties and investments in the western part of the state. But today it can help the whole of Paraná. Of course, we don’t need to invest in Londrina, Maringá, Cascavel, richer cities. But smaller cities, with the lowest HDI, will be served.

O mr. You should know that the policy based on these socio-environmental projects is called by some people ‘pay for two and get one’, right? No. Why?

Everything is divided among Itaipu’s partners, including the money for these projects. Every dollar used in Brazil on a socio-environmental project represents another dollar destined for Paraguay for their socio-environmental mission. However, as 85% of energy from Itaipu is consumed by Brazilians, who pays most of the projects is Brazil. Is this fair to Brazilians? There are two things here. Paraguay does not consume energy that is its own and, according to the treaty, it can only sell to Brazil. Brazil, in turn, needs this energy. The important thing about your question is that it clarifies the fight over the fare price. We want an increasingly cheaper tariff because we consume more, and Paraguay wants an increasingly expensive tariff because it sells almost everything here.

This should last another ten years, when Paraguay will consume all its electricity. Then I have the impression that he will want to lower the tariff.

The issue of socio-environmental investment is not quite like what you said. The division of resources is fifty-fifty, but our investment policy is not exactly the same. There is no commitment from Paraguay to implement a social inclusion policy as we want to do in Brazil.

But those who are paying most are the Brazilians, I mean that. The tariff is charged on the electricity bill of all consumers in the South, Southeast and C regions.enter West. Data indicate that up to 110 million people pay for this energy, almost 50% of the population. But we buy it because we need it.

What I am saying is that the majority do not have access to these socio-environmental benefits. That is not cash transfer even socially unfair? This is a debate that is starting. It was more unfair when it only served western Paraná, a region of 56 or 54 municipalities, depending on the analysis. The debate now is to expand on this.

But you’re right. It was the Brazilian people who paid the bill for Itaipu. Itaipu is a national asset. However, investments in Paraná are reflected in other areas. For example, when Itaipu invests to finish Unila, the Ministry of Education will not take money from the education budget for it and, consequently, this resource will be left over to invest in the rest of the country.

In the case of the university, we can give another example. There are millions of Brazilians living in poor communities in the region, without access to an education superior, who will pay the university in Paraná for the light bill. Yes. The debate about this has already begun. Some ministers have already drawn attention to this.

There is another data. The reduction in the value of the tariff that we achieved represents a drop of 1 percentage point in the value of energy in the country.

On April 26, the Itaipu treaty completes 50 years. Once the debt is paid and the election in Paraguay decided, it will be possible to renegotiate Annex C, which deals precisely with financial issues. Does Brazil already know what it intends to demand? We have technical groups, including those in the Ministry of Foreign Affairs, studying Annex C and preparing the material. In Paraguay, we know that the debate is more heated and that they have been discussing it for three, four years. It even has a parliamentary front. The discussion between chancellors of the two countries should start in August.

The course of negotiations will be affected by who emerges victorious in the election. I’ll give you an example.

If a more liberal candidate wins, will he prefer to supply electricity to the Brazilian state or will he want to sell it on the free market? Will Paraguay want a more expensive tariff to continue making investments in the State, in addition to supplying energy, or, due to its economic growth, which is constant, will it find it better to lower the price and improve its competitiveness in the world?

What is important is for us to reflect that Itaipu only managed to survive 50 years because of a profound dialogue. We fight, we suffer from noise, we have problems of interest, our countries are different in many ways, but mutual respect has allowed us to get to where we are.

Itaipu does not generate profit. It charges the necessary amount just to maintain itself. In your opinion, which would be the most appropriate model? In my opinion, Itaipu should maintain the current model, remembering that part of the model implies guaranteeing returns, not in the form of profits, but of other benefits, such as investments in innovation projects and socio-environmental public policies.

I defend this role. The role of a state-owned company, which does not generate profit, but is an instrument of motivation for economic and social development.

From this perspective, it would not be within the scope, at least in the short term, to reduce the cost and, consequently, the tariff, not least because it would be necessary to guarantee extra resources. Yes, I would.

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Enio Verri, 62

Born in Maringa (PR), he is an economist and holds a Master’s degree in Economics from UEM (State University of Maringá), where he taught, and a PhD in Integration of Latin America from USP (University of São Paulo), as well as a specialist in Economic Theory from Faculdade Estadual of Economic Sciences of Apucarana. He was a federal and state deputy for the PT.