Partners negotiate financing for La Vueltosa in Venezuela

05/19/2003 - Source: Business News Americas (<a href=www.latintrade.com>LatinTrade-BNamericas.com) - The governments of Venezuela and Brazil, together with France's Alstom, are negotiating financing for the US$160mn La Vueltosa hydroelectric dam in western Venezuela, Alstom Brazil systems manager Edwaldo Tamberg told BNamericas.

A consortium of Alstom Brasil's Power Environment unit and the French parent company Alstom signed May 11 a turnkey contract with the Uribante Caparro Development (DESURCA) unit of state power company Cadafe to build the powerhouse, transmission lines and two substations for La Vueltosa.

Talks are ongoing with Brazil's national development bank BNDES and French export development agency Coface, Tamberg said. The final division of work depends on the outcome of these talks, but preliminary calculations suggest 80% will be supplied from Alstom Brazil and 20% from Alstom France, he said.

The whole project is brokered on recent talks between the Brazilian and Venezuelan presidents, Luiz Inacio Lula da Silva and Hugo Chavez, and the prioritization of bilateral trade and partnership, Tamberg said.

As well as determining financing, this also helps mitigate some of the political risk, Tamberg explained. Because the talks are between the two governments any default on payment would be with the government and not Alstom, Tamberg said.

"We understand that as long as both governments are in agreement, secure the financing and regulate the guarantees in the best line of the law, the interests of Alstom will be safeguarded," Tamberg said.

"A default by Venezuela would not be a default with Alstom Brazil but with the Brazilian government. It is a different type of risk," Tamberg said.

This is an evolution of the now extinct Reciprocal Trade Covenant (CCR) agreement that used to exist between Latin American countries, Tamberg said. Under CCR, cross border trade between companies was provided with guarantees between the two governments - but it was killed after the financial chaos of recent months and years.

"CCR will not return in the model that was effective previously and that was bilateral for all countries. We needed a new instrument to substitute it, and that is what is being developed now," Tamberg said. "The conditions are being recreated for foreign trade to start working again."

As well as Venezuela, the Brazilian government has determined that Argentina is a priority, and Alstom will seek opportunities with both these countries, where the chance of securing financing for exports is higher, he said.

Alstom will hire a construction company for the civil works at La Vueltosa, which are expected to be straightforward, as the dam was built 10 years ago and geological risks are therefore low, he said.

Alstom will install two Francis turbines, generation units and all associated equipment for total installed capacity of 514MW.

Work should be completed within 36-38 months from the date when financing is closed.