GDF SUEZ and Mitsui & Co. Ltd. have agreed a partnership on the 3,750 MW Jirau hydro power plant in Brazil. Mitsui will take a 20% equity interest in the project. The transaction has been based on an equity value of BRL 5.7 billion at 100% (€ 2.2 billion(1)), as of December 31st, 2012. As from closing, Mitsui will participate in funding and remaining implementation of Jirau.
The project is to construct and operate the Jirau hydropower plant, which is located on the Madeira River in the State of Rondônia in northern Brazil. Its total generation capacity of 3,750 MW will make the project the fourth largest hydropower plant in Brazil. A loan agreement on a project finance basis has been executed with BNDES (Brazilian Development Bank) and a group of commercial banks, and both the operational license and environmental license have already been granted. Full commercial operation with all 50 turbines is expected to be achieved in 2015. Project capex until completion is approximately BRL 16 billion as of December 2012 (€ 6.1 billion).
The Jirau project is 73% contracted under 30-year power purchase agreements (PPAs) with a pool of distribution companies, the remaining being contracted to the existing shareholders.
The transaction further expands the long-term partnership between GDF SUEZ and Mitsui, following a successful track record of joint investment and cooperation, including projects in Canada, Europe, Middle East & Africa, Asia and Australia. The Jirau transaction represents an extension of this partnership to Latin America, sharing a broad strategy of accelerating developments in fast growing markets and expanding the renewable portfolios.
Gérard Mestrallet, Chairman and Chief Executive Officer of GDF SUEZ declared: “I am very pleased to welcome Mitsui as new partner in the Jirau project. This dam is our major project in Brazil and reinforces our commitment to supporting the growing energy demand in the country. It is part of GDF SUEZ strategy to partner with strong industrial companies to facilitate the completion of major developments. The commissioning of Jirau will demonstrate our ability to deliver important energy infrastructure in key markets.”
During the second half of 2012, GDF SUEZ increased its equity holding in the Jirau project from 50.1% to 60% by acquiring a 9.9% additional stake from Camargo Correa. Since the inception of the project, the shareholders had agreed that Camargo Correa, project’s main contractor, would exit Jirau during the later stages of construction. GDF SUEZ bought these stakes to be able to control the composition of the new partnership. Post-closing of the transaction with Mitsui, GDF SUEZ will remain the largest shareholder of the project holding a 40% stake, whereas Eletrobrás’ subsidiaries CHESF and ELETROSUL will keep retaining a 20% stake each, same share to be held by Mitsui.
This transaction is consistent with GDF SUEZ’s strategic priorities in line with its track record to develop large contracted greenfield projects in partnership. GDF SUEZ confirms its ambition to develop further in fast growing markets and particularly in Brazil, where the Group can leverage on a 15-year presence and its position as the largest private player in the generation market with a total installed generation capacity and projects of 12.4 GW, at 100%. GDF SUEZ will play an important role in Brazil’s ambitious energy expansion plan, which already foresees new hydro opportunities amounting to around 19 GW in the next 10 years, combined with the implementation of other technologies, such as thermal, wind, biomass, etc.
This new partnership in the Jirau project will contribute to the 2013-2014 Group’s portfolio optimization program. As of closing, Jirau will be accounted for under the equity consolidation method. Group consolidated net debt will then be reduced by around € 2.2 billion as a consequence of deconsolidation (excluding the impact of cash disposal proceeds).
Closing of the transaction is expected to occur during the second half of 2013, upon satisfaction of certain conditions, including obtaining approvals from Brazilian authorities (ANEEL – Electricity Energy Regulatory Agency and CADE – Brazilian anti-trust entity) and lenders (BNDES and local commercial banks).
(1) In this press release EUR/BRL exchange rate is 2.62
About GDF SUEZ
GDF SUEZ develops its businesses (electricity, natural gas, services) around a model based on responsible growth to take up today’s major energy and environmental challenges: meeting energy needs, ensuring the security of supply, fighting against climate change and maximizing the use of resources. The Group provides highly efficient and innovative solutions to individuals, cities and businesses by relying on diversified gas-supply sources, flexible and low-emission power generation as well as unique expertise in four key sectors: liquefied natural gas, energy efficiency services, independent power production and environmental services. GDF SUEZ employs 219,300 people worldwide and achieved revenues of €97 billion in 2012. The Group is listed on the Paris, Brussels and Luxembourg stock exchanges and is represented in the main international indices: CAC 40, BEL 20, DJ Euro Stoxx 50, Euronext 100, FTSE Eurotop 100, MSCI Europe, ASPI Eurozone, Vigeo World 120, Vigeo Europe 120 and Vigeo France 20.