Itaipu’s financial director, André Pepitone, said this Thursday (9), at the ABRA-tec event – Technological Innovations and Socioeconomic and Environmental Sustainability of Hydroelectric Power Plants, that the binational plant has contributed significantly to the low electricity tariff from Brazil. The meeting took place at the Itaipu Technological Park facilities, in the plant area.
Director explained Itaipu’s new role in the sector and for society. Photos: Sara Cheida/Itaipu Binacional
According to the director, with the payment of the debt for the construction of the hydroelectric plant, on February 28, 2023, Itaipu’s reality in the electricity sector changed. “When we look at the value of MWh (megawatt-hour) in the auctions held by the Electric Energy Trading Chamber, the cost of energy from Itaipu is the third cheapest,” he stated.
Pepitone stated that energy from Itaipu is the third cheapest in Brazil.
The only thing cheaper than Itaipu is the cost of the quota plants in Law number 12,783/13 and the hydroelectric plants on the Madeira River – Santo Antônio and Jirau – and the Xingu River – Belo Monte.
“Today, if we take the average energy purchase price from all the distributors in which Itaipu is a shareholder, Itaipu’s energy comes in below the average price, pulling the energy value down, that is, contributing to the Brazilian consumer pays for cheaper energy”, he concluded.
The financial model adopted in Itaipu is Revenue by Cost, that is, revenue is established to fully cover costs, without calculating profit. Operating expenses include expenses related to the provision of electricity services, including operation and maintenance, as well as administration expenses and investments in the field of social and environmental responsibility.
Another expected expense is capital income: 12% per year on its participation in the paid-in capital, paid to Ande (Paraguayan state-owned company) and ENBpar (Empresa Brasileira de Participações em Energia Nuclear e Binacional).
“Even with the cost of the socio-environmental program, Itaipu today reaches a highly competitive value in the market”, said Pepitone.
The costs also include the payment of royalties for the use of hydraulic potential and the reimbursement of administration and supervision charges, paid to Ande and ENBpar.
Itaipu’s Unit Cost of Electricity Service (CUSE) reached its lowest historical value in 2023, after the renegotiation of the plant’s construction debt, the last installment of which was paid on February 28, 2023, when US$107 was transferred million to BNDES and US$8 million to Eletrobras.
Pepitone also made a point of highlighting that, according to the Itaipu Treaty, the acquisition of electrical energy produced by the plant can only be done by Ande and ENBpar. “There is no forecast of commercialization to other entities,” he stated.
The director also highlighted that Binacional has a difference in relation to other companies in the market. “Firstly, because it is a binational and, secondly, because it has to generate energy and also promote the socio-environmental development of the region.”
“Even with the cost of the socio-environmental program, Itaipu today reaches a highly competitive value in the market. Again, a value below the average cost of distributors, the average ACR, which is the average price in the country”, he reinforced.
The executive financial director recalled that, in addition to its importance in the production of electrical energy, the binational plant today directly benefits 17,704,000 people in its area of coverage. There are around 11 million Brazilians, between Paraná and Mato Grosso do Sul, and the entire Paraguayan population, estimated at 6,704,000 inhabitants.
The number of Brazilians increased with the expansion of the plant’s operating area to all 399 municipalities in Paraná and 35 in Mato Grosso do Sul. On July 21 of this year, the Itaipu Board of Directors approved the “Itaipu More than Energy”, which foresees the investment of 931.5 million in these municipalities, especially in the social areas and inclusion.
Pepitone explained that Itaipu’s investments in the field of social and environmental responsibility were reinforced in 2005, by Reversal Note 228, exchanged between Brazil and Paraguay, which provides that these activities “must be included as a permanent component in the activity of energy generation, in accordance with the mission, policies and guidelines established, or that will be established, by the Board of Directors of the binational entity”.
According to him, these negotiations between the two governments, regarding Itaipu, are already the result of the first discussions that gave rise to the binational hydroelectric plant. With the signing of the Treaty of Itaipu, which celebrated fifty years this year, increasingly stronger ties began to be created between the two countries, which resulted in investments in the most diverse areas.
With the payment of the debt, Brazil and Paraguay are preparing to negotiate Annex C of the Itaipu Treaty, which deals with the financial bases and provision of electricity services. When the Treaty was signed, it was anticipated that the provisions of Annex C would be reviewed after 50 years, taking into account, among other aspects, the degree of amortization of debts contracted by Itaipu for construction and the relationship between the powers contracted by the countries .
The negotiation of Annex C will be the responsibility of the Ministries of Foreign Affairs of both countries, as provided for in the Itaipu Treaty, with the support of the authorities in the respective energy and electrical sectors. “Itaipu’s role is to technically subsidize the work of the High Parties in this negotiation”, he commented.
The environmental benefits brought by the entry into operation of Itaipu include the absorption of CO2 in protected areas and the reduction of emissions, which, in these almost 50 years, reached 2.94 million tons of CO2 equivalent per year.
For the population of Itaipu’s area of operation, the plant’s latest investments alone, on the Brazilian margin, amount to more than R$ 1.6 billion in infrastructure works, including the Integration Bridge (and East Perimeter), lighting of the urban stretch of BR-277 and a stretch of Estrada da Boiadeira, in addition to the expansion of Foz do Iguaçu airport and the duplication of Rodovia das Cataratas, currently underway.
Regarding strategic projects, Pepitone cited the investments in the revitalization of the Direct Current System associated with the Itaipu plant (HVDC), worth US$ 380 million, the Technological Update of the Plant, worth US$ 956 million, and the contribution from Itaipu to the new PAC (Growth Acceleration Program), over the next four years, with an investment of US$889 million.
“All of these commitments bring benefits to national consumers and promote the social and economic development of both countries, maintaining the competitiveness and financial sustainability of the binational entity”, he informs.
The ABRA-tec event – Technological Innovations and Socioeconomic and Environmental Sustainability of Hydroelectric Power Plants takes place at the Cesar Lattes Auditorium, at PTI. The initiative is from ABRAPCH – Brazilian Association of PCHs (Small Hydroelectric Plants) and CGHs (Hydroelectric Generating Plants).
At the opening of the event, the president of ABRAPCH, Alessandra Torres, said that technological innovations have played a significant role in promoting the socioeconomic and environmental sustainability of the energy sectors. “Hydroelectric plants offer socio-environmental benefits and mitigations, especially small ones. PCHs and CGHs are sustainable enterprises, they are decarbonization assets that must be prioritized by the planner, as they are a Union asset,” she said.
Pepitone with the president of ABRAPCH, Alessandra Torres.
For Pepitone, CGHs and PCHs have historical importance in Brazil, because they promote development. “The installation of PCH generates jobs, income and development for small municipalities. Now, for all this to happen, we need to have structured regulation and public policy supporting this initiative.”
Itaipu’s financial director recalled that PCH already had its peak in Brazil, but then had a period of decline and, now, is once again represented in the market. “The big national discussion we have today is how to adequately remunerate plants for the services they provide to the system. They lose a little the relevance of energy security and gain a very great relevance of operational security, which is the great need of the system today.” And he concluded: “So, sector-wise, there is this whole debate today so that, soon, we manage to balance the remuneration of hydroelectric plants and PCHs, bringing the appropriate signals for development”.