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Investors have cancelled more than US$1bn of investments in

  • Brazil ‘s power sector in the first two months of 2003, due to uncertainties in the electric power sector.

    All projects are stopped, or moving very slowly, awaiting decisions by the new government, AES Tiete vice-president Demostenes Barbosa da Silva says. The problems with unstable regulatory environment and high market risks mean that Brazil may face further electric power shortages in the not-too-distant future, Silva adds.

    According to figures released by grid operator ONS, the most pessimistic scenario for growth in demand show that the current surplus in the power market estimated at around 10GW would be used up within 3.5 years. If economic growth is even marginally better than the worst-case scenario, then that period will be significantly reduced.

    On the other hand, it will take investors at least four years to get new generation projects off the ground, including the time it takes for the government to publish its new model, and carry out law reforms, environmental licensing and construction, da Silva says.

    Da Silva has called on the Brazilian government to create a financial fund that could be used to finance investments in the electric power sector.

    The president of Brazil’s federal power company Eletrobras, Luiz Pinguelli, has called on foreign and domestic pension funds to take a more active role in financing energy projects, and suggested the government should provide incentives for this group of investors.