Itaipu Binacional clears historical debt for construction of the Plant

Itaipu Binacional paid off on Tuesday (28) the last installments of the debt contracted for the construction of the hydroelectric plant, almost 50 years ago, and became an amortized company. The latest payments were destined to Eletrobras and the National Bank for Economic and Social Development (BNDES) and total US$ 115 million.

The debt settlement was celebrated in an official ceremony at the plant’s Production Building, attended by Brazilian and Paraguayan directors and board members, along with authorities from both countries.

The Brazilian Minister of Mines and Energy, Alexandre Silveira, said that the payment of Itaipu’s debt is a milestone that demonstrates “not only the grandeur of this project for the history of our countries but the path to an even more prosperous future.”

Silveira added that the settlement paves the way for the renegotiation of Annex C of the Itaipu Treaty, which establishes the financial and provision bases for the power plant’s electricity services. The negotiations will involve the governments of Brazil and Paraguay and are expected to begin in August this year.

“The revision of Annex C will strengthen the partnership bond between Brazilians and Paraguayans, with an increasingly clear look, not only at energy and commercial needs, but also at the best allocation of resources to the population that needs it so much,” he added.

The matter was also addressed by the Paraguayan director general of Itaipu, Manuel María Cáceres Cardozo. “We are ready for the next commitment. I believe that this (debt repayment) gives peace of mind and greater freedom for the revision of Annex C and other components of the treaty, in order to close the agreement in the coming years”, he said in an interview after the ceremony.

According to Cáceres, the payment of Itaipu’s debt is not an individual achievement, but reflects “the effort of successive governments that allowed it to reach this day.”

The Brazilian Ministry of Foreign Affairs released a note on Tuesday afternoon to celebrate “the success of the financial engineering of this 50-year project, which unveils a new phase for the company and for energy consumers.”

“Itaipu Binacional is a strategic company for the energy security of Brazil and Paraguay, serving more than 13% of Brazilian electricity demand and 90% of Paraguayan electricity consumption in the last 10 years”, states the note.

“Against the backdrop of growing concern about the impacts of human activities on the climate, the 2.9 billion megawatt-hours generated since the start of its operation represent an important contribution of clean energy to the planet.”

Debt amount

The total debt payment for the Itaipu hydroelectric project was US$ 63.5 billion, used so that all the necessary infrastructure could get off the ground – including land expropriation, construction of houses and payment from contractors. Of this total, US$ 35.6 billion was paid as amortization of loans and financing and US$ 27.9 billion as financial charges.

The binational company itself was responsible for obtaining the loans, as provided for in the Treaty of Itaipu, signed in April 1973 and which this year completes 50 years. The funds were guaranteed by the Brazilian National Treasury.

Since then, more than 300 financing contracts have been signed, with about 70 creditors of Brazilian, Paraguayan and other nationalities. Payments were made according to the contracted conditions – monthly, quarterly and semi-annual.

Itaipu’s main financiers were Eletrobras, BNDES, Finame, Banco do Brasil and international financial institutions such as Citibank, Dresdner Bank, Deutsche Bank, Swiss Bank Corporation and JPMorgan.

The governments of Brazil and Paraguay disbursed only the amount necessary to compose the company’s share capital of US$ 100 million, half from each country.

Payments

There are accounting records of the beginning of the payment of debts, still in the 1970s, many of them to cover payments on other loans contracted with certain grace periods, given the market conditions of the time and the impossibility of generating revenue by Itaipu, which was not yet in operation.

In March 1985, almost a year after the first generating unit came into operation, Itaipu began to commercialize the energy produced and generate revenue.

In this way, and since then, the Itaipu tariff – called the Unit Cost of Electricity Service (Cuse), paid by Brazilian and Paraguayan consumers – has provided the necessary resources for debt amortization.