SAO PAULO, July 25 (Reuters) - State-run energy company Chesf, a subsidiary of Brazil’s federal energy holding company Eletrobras, has delayed the delivery of more than 1,000 kilometers of transmission line projects for lack of funds to complete the work, data compiled by Reuters showed.
The delay is likely to crimp the national grid in the country’s Northeast, where Centrais Eletricas do Brasil SA , as Eletrobras is known officially, plans to sell many of its distribution assets. It will also generate company fines.
Chesf has racked up 1,500 days in project delays, which specialists say is due to overly ambitious expansion. Other subsidiaries of Eletrobras are in similar straits after the government pushed hard to lower rates of return for projects up for auction in recent years.
“It’s a result of Chesf’s taking on too many projects and weak returns on investment,” Bernardo Bezerra, director at PSR consultants, said. “The discounts offered by bidders were hefty.”
According to data compiled by Reuters from electric sector regulator Aneel, Chesf won 30 percent of the transmission projects that sold in auction between 2010 and 2012, after which the company was banned from further participation in auctions due to its growing backlog.
Over the same period, consortiums with one of Eletrobras’ subsidiaries as partner accounted for 60 percent of all generation and transmission line projects won in auction. Nearly all the winning bids aggressively discounted the maximum profits allowed by the auction.
Brazil’s Electric Sector Oversight Committee (CMSE) says at least 11 projects of Chesf should be ready to operate but will only be concluded in 2017 and 2018 due to “limited financing.”
Chesf did not reply to a request for comment by Reuters.
The former director of Aneel, Juliao Coelho, said the problems facing Chesf were foreseeable.
“This is the fruit of inflating the role of the state company. They tried to get too big by squeezing returns so much that investments didn’t make sense,” Coelho said. “First there were delays. Now they can’t even complete the projects.”
Coelho oversaw the process at Aneel of restricting companies with delays on their records from majority participation in groups bidding in future auctions.
The new rule came after Chesf failed to meet its deadlines for finishing transmission lines, which forced consumers to pay millions of reais for the generation of energy from plants that could not be hooked up to the national grid.
Chesf currently is 1,472 days behind on all its transmission projects combined, according to Aneel. The company has been fined on seven occasions by Aneel, for which it has already exhausted its appeals.
The government of interim President Michel Temer has given a clear signal that it plans to reduce the role of state-run companies, including Eletrobras, in the economy and improve governance standards.
Eletrobras and state-run oil company Petrobras have been rife with corruption and are the focus of investigations by prosecutors in Brazil’s biggest ever graft scheme, known as Operation Car Wash.
Chesf posted an 8 million reais ($2.4 million) net loss in the first quarter. (Writing by Reese Ewing; Editing by Leslie Adler)