That MP was broadened by its rapporteur, who included benefits for the states’ power-distribution companies

The House Floor approved, on Wednesday (25) the Provisional Measure 450/08, which authorizes the Union, the states and the Federal District to participate on the Security Fund for Electrical Power Undertakings (FGEE). That fund will offer guarantees to banks financing the construction of hydroelectric power plants and power lines. The matter will be forwarded to the Senate.

The approved text belongs to the Conversion Bill proposed by Deputy Eduardo Cunha (PMDB-RJ), who broadened the original objectives of the fund. Initially, only projects in which federal government power companies would participate would be benefitted. Cunha extended that mechanism to the states’ companies, but the legislative assemblies will need to authorize the governments to participate in the fund as allotters, and transfer funds to it.

FGEE will be administered by a federal bank and will guarantee states’ undertakings that are considered as strategic, or those previewed in the Growth Acceleration Program (PAC).

The guarantee should be proportional to the participation of the government companies of the industry in the so-called specific-proposal societies (SPE), created to manage undertakings.

Streamlined bidding process
One of the most criticized points by the opposition in the report of Eduardo Cunha is the preview that the president of the Republic will define, by a decree, a streamlined way for bids for Eletrobras (Brazilian Electric Centrals) and their controlled companies to acquire goods and services.

According to the rapporteur, that possibility has already existed for Petrobras since 1997 (by means of Law 9.478), and the Ministry of Mines and Energy asked that the mechanism be extended to Eletrobras.

The opposition parties and some others of the government basis tried to eliminate that device from the MP, but the government got to keep the text, thanks to the votes of 191 congresspeople, against 185.

Council
A council will define the method for the application of the resources of FGEE and will choose which projects will be guaranteed from the ones forwarded by the Finances Ministry, after the previous choice of the Ministry of Mines and Energy.

The managing bank will receive a payment for the administration of the fund, which will only be solved after the acquittance of all guaranteed debts or of the authorization of the guarantees by the creditors.

Rio Madeira
The Power plants of Jirau and Santo Antônio, in the Madeira river, in the Northern state of Rondônia, should be the first benefitted undertakings.

The financing of those works has been hampered by the difficulty in obtaining, in the international market, guarantee insurance after the financial crisis. Since there is also no company in the domestic market, which offers guarantees for the previewed costs (R$21 billion, around US$9 billion), the government decided to create the FGEE.

The largest private national Banks do not show interest in financing those undertakings, which should be partially funded by the Brazilian Development Bank (BNDES), by Caixa Econômica Federal (Federal Savings Bank) and by Banco da Amazônia (Amazonia Bank).

Report - Eduardo Piovesan
Editing - João Pitella Junior
Translation - Positive Idiomas Ltda