August 2, 2000

A New Nuclear Reactor Sheds Only Some Light on Brazil

By JENNIFER L. RICH

ÃO PAULO, Brazil, Aug. 1 -- The southeastern region of Brazil felt a surge of nuclear power a few weeks ago. This was notable because the surge had been awaited for more than 20 years.

After what seemed like interminable delays, the country's second nuclear reactor, Angra II, came online with a generating capacity of 1,300 megawatts of badly needed electricity, about a third of that used by the city of Rio de Janeiro.

Angra II is part of the government's plan for meeting the country's desperate need for new sources of electric power. But it is only a fraction of the estimated 26,000 megawatts of new electricity that will be needed in the next five years.

And with Brazilian hydroelectric facilities threatened by low rainfall, and plans for gas-run power plants still in the initial stages, Brazil's energy troubles are worsening.

"Brazil is going to have a crisis in the electricity sector because it didn't make investments when they should have been made," said Luiz Pinguelli Rosa, deputy director of the postgraduate engineering program at the Federal University of Rio de Janeiro and one of the strongest critics of the government's energy program.

Brazil's power problem became painfully apparent one evening in March last year, when the entire southern region of the country, much of it populous and industrial, went dark.

The blackout, which affected three states and the federal district, was caused by weakness in the electricity grid, which was and still is working near full capacity.

Investment in electricity stopped once the Asian economic crisis struck in 1997. For the next three years, financing for electrical projects in the region was paralyzed, and the government, which was busy containing damage to the entire financial system, could provide little help.

Even now, to maintain current plants while investing in new generating, transmission and distribution facilities, the country needs about $6 billion annually. The government says it can only provide about $1 billion.

For this year, at least, officials say they have pulled together enough sources of energy to meet new demand of about 4,500 megawatts. Besides Angra II, Brazil has purchased 1,000 megawatts of electricity from Argentina with an option to import 1,000 megawatts more.

The government also announced last month that it was negotiating with Paraguay to buy its entire share of the energy from Itaipú, a joint-venture hydroelectric dam that straddles their border. "Brazil has always muddled through," said David Hurd, Latin American electricity analyst at Deutsche Bank. "It's the way the country operates. Between imported energy coming out of Argentina and the makeshift increases in hydro capacity, they'll make do."

The difficulty, Mr. Hurd added, will be in following through on plans to build the gas-powered thermoelectric plants that are meant to reduce dependence on hydroelectric power, which now provides 97 percent of the country's electricity.

A drought in the south and southeast has aggravated Brazil's vulnerability to hydroelectric problems

The government wants to grant concessions to industry to build 49 thermoelectric plants. But thermoelectric plants have their own problems. They are costly to operate, and Brazil's regulatory structure does not yet provide companies with a safe source of returns. Without a certain profit stream, experts say, financing for the projects will be difficult to obtain.

The government says that at least nine of the plants can be up and running in the next 18 months. Mr. Pinguelli and others say the process will take, at the least, two to three years.

"We could perhaps save ourselves this year if it rains a lot," he said. "Next year, I think we are going to have rationing."

Copyright 2000 The New York Times Company