Brazil's Belo Monte Not Seen As Essential To Energy Demand

Published in the Wall Street Journal

SAO PAULO (Dow Jones)--Brazil's lights will stay on whether or not the planned Belo Monte hydroelectric dam ever sees the light of day, some top sector analysts said Monday.

"Our view is that Brazil will not lack power supply if Belo Monte does not get built because thermoelectric power companies and wind power will be available to meet demand," said Marcos Severine, a senior analyst at Itau Securities in Sao Paulo.

The drama over the 11,000 megawatt power station has many local pundits saying that Brazil will not meet energy demand right around the time the nation hosts the World Cup in 2014 and the Olympic games in 2016.

Although Brazilians are notorious for talking their country into a catastrophe, Walter Vitto, an industry consultant at Tendencias in Sao Paulo, said where Belo Monte fails, coal and natural gas will find their niche.

"We are not going to be facing the chaotic rolling blackouts we faced in 2000 and 2001," he said. Back then, the government was reining in spending and private energy companies were not investing in expansion due to uncertainties over the new, regulated energy market policies being created at the time.

"There is certainly the risk that hydroelectric power won't be able to meet demand, but then the new natural gas, wind and coal fired plants will be able to make up for it," Vitto said.

The Belo Monte dam was supposed to be auctioned off to bidders in December but that has been postponed because the environmental protection agency, Ibama, has not yet signed off on the project.

The dam will be Brazil's second largest power station behind the Itaipu dam in the south, which has installed capacity to generate 14,000 megawatts of electricity.

Later this month, the government will hold the so-called A-5 energy auction. The auction, designed to meet energy demand in five years' time, is dominated by natural gas and coal-fired power companies.

Nearly 80% of Brazil's electric power comes from hydroelectric dams.