Brazil’s Celesc finds “Light for All” program not profitable
Brazil's Santa Catarina state power distribution company Celesc considers the federal government's power supply
expansion program Light for All more of a burden than a solution because of high costs and low returns, company CFO
Gerson Berti told.
The Light for All program was launched by the federal government in 2004, aiming to speed up the connection of an
estimated population of 12 mm people living in poor rural properties to the national grid by 2008. Under the program
distributors are granted subsidized financing from state and federal governments as well as federal power holding
company Eletrobras to connect free of charge a target number of rural properties, to which distributors then sell
power at subsidized rates.
In 2005 Celesc expects to connect 10,000 rural properties, or half of the state's target for 2006. Total investment
in the project in Santa Catarina is budgeted at 100 mm reais ($ 44.6 mm), of which 60 mm reais will be invested in
2005. The other 10,000 connections will bemade in 2006.
"We are not happy about these new connections because the costs are high and not [fully] recognized by the federal
government," Berti said.
Of the total investment budgeted, Celesc is due to invest some 20 % from its own funds and the state government 30 %
through tax waivers, while the federal government will invest 25 % and Eletrobras 25 % through subsidized loans. The
problem is that each connection is costing Celesc some 8,000 reais, more than 60 % higher than the 4,600 reais
estimated by the federal government in its financing plan.
"This means that Celesc has to dig further into its pockets to conclude the program," Berti said.
Celesc will have to invest some 60-70 mm reais more than the program's 100 mm-real budget and this will come from the
company's own funds, without any subsidies or flexible loan terms, Berti said.
On top of the higher-than-expected investment, the company will have to service new rural clients, who are spread out
but expected to consume little.
