How Itaipu Binacional plans to break new power generation records

Thursday, February 1, 2018

Brazil's largest power generation plant, Itaipu Binacional, is preparing to undergo an intensive technological upgrade, which will require the investment of some US$500mn. The Brazilian general director of the binational company, Luiz Fernando Leone Vianna, spoke to BNamericas about this other initiatives that the company plans put in place over the coming years.

BNamericas: Itaipu Binacional began 2018 by breaking a new power generation record. Can new milestones be expected this year and the following years?

Luiz Fernando: We've just had the best fortnight in the history of Itaipu's operations. This is emerging data, as we're still at the very beginning of the year, but there are several factors that could lead us to break new records, including water administration and maintenance planning.

However, there are external factors, such as the country's hydrology, power load and the availability of the transmission system, which belongs to Furnas [Brazilian state-run power company Eletrobras Furnas]. Anyway, we do expect this outstanding result to be repeated throughout the year and that we will be able to surpass the 100mn MW/h power generation mark.

BNamericas: What are the company's main goals in 2018?

Luiz Fernando: To begin the tender process for the plant's technological upgrade, a US$500mn, 10-year project. We're now preparing to issue the first tenders. Another matter is the operation of the reservoirs under lower quotas. So we will begin works to deepen the Piracema channel, which links the Itaipu plant's upstream to its downstream. We're also investing in human resources management, focusing on training and employee satisfaction. We started implementation of a program in 2017, which will be continued this year.

BNamericas: How are the negotiations going for a binational agreement to amortize the company's debt a year early?

Luiz Fernando: We're making every effort in this regard. The first step was taken last December, when we made an early US$170mn payment to Eletrobras. Our goal is to have the debt paid off by 2022, which is a consensus between Brazil and Paraguay.

BNamericas: The Itaipu agreement calls for a revision of royalty payments in 2023, when the 50-year period for debt amortization is over. Is this issue under discussion?

Luiz Fernando: We will be intensifying negotiations in order to reach a position dictated by the Brazilian government and then, maybe this year, to initiate talks with our Paraguayan partners. This is a key issue and there are actions that must be put into place right now, such as estimating  the need for new auctions to contract electric power in advance.

BNamericas: What is Itaipu's current power rate? How does it compare to 2017 and how is it expected to behave over the coming years?

Luiz Fernando: At the end of 2017 we reached an agreement with Paraguay to maintain the rate at 135 reais/MWh [US$42.7]. It's a highly competitive rate and we intend to keep it at this level for the coming years. The challenge is to be able to make further investments in the preservation of our reservoir in the west of Paraná state, in water quality and avoid silting it up without raising the rate by 2023. We still don't know if Itaipu's power will continue being traded at below market prices [the Eletrobras privatization bill foresees the end of the quota regime]. 

BNamericas: How do you see the hydrological risk in the country?

Luiz Fernando: We're very attentive as we may be subject to this issue in 2023. There has to be a legal position within the legislation in order to settle this problem, considering the high levels of financial default. The national congress has to mobilize and propose amendments enabling a solution, as the entry of wind and solar power in the electric power grid has been pushing hydrological risk to a level that generators cannot bear.

About Luiz Fernando Leone Vianna

Luiz Fernando Leone Vianna has been Brazilian general director and a member of executive board of directors at Itaipu Binacional since March, 2017. He served as the CEO of Companhia Paranaense de Energia (Copel) from January 2015 to March 2017 and served as its secretary until March 2017. 

About the company

Itaipú is a Latin American asset controlled by the Brazilian and Paraguayan governments. The purpose of the entity is to make use of the water resources of the Paraná river between Guaíra and the mouth of the Iguaçu river, which belong to both countries, by constructing and operating a hydroelectric plant. The plant is formed by 20 generator units with an installed power capacity to produce 14,000MW. It provides nearly 17% of the energy consumed in Brazil and 75% of the energy consumed in Paraguay.