February 22, 2017 / 9:20 PM / 6 months ago

Exclusive: Brazil's Petrobras denies Eletrobras gas for new power plant - letter

The logo of state-run oil company Petrobras is pictured in the company headquarters in Vitoria, Espirito Santo, Brazil, February 10, 2017.Paulo Whitaker

SAO PAULO (Reuters) - State-run oil company Petroleo Brasileiro SA (PETR4.SA) has alerted Brazil's electricity sector regulator that it would not supply natural gas for a new thermoelectric power plant under construction in the Amazon region.

In a letter to regulator Aneel seen by Reuters, Petrobras said it would not sign a contract with state-led power utility Centrais Eletricas Brasileiras SA, known as Eletrobras (ELET6.SA), because its subsidiary Amazonas Energia, which is building the plant in Manaus, owes it more than 2.5 billion reais ($814 million) for fuel supplies.

The document was seen by Reuters under Brazil's Freedom of Information Act. Petrobras declined to comment.

The warning to the electrical sector was an indication of the efforts being made by Petrobras, the world's most indebted oil company, to put its finances back in shape.

The 1.1 billion, 590-megawatt Mauá 3 thermal plant is close to completion, but is at risk of not getting the gas to run on.

According to an Aneel report, the first turbine is due to start generating in May.

"Petrobras is not prepared to supply an increased consumption of gas that is not being paid," the company said in the letter sent to regulators last week. "We should make clear to Aneel that there is no prospect of supplying natural gas to Mauá 3."

Petrobras said no contract or supply commitment had been signed with Eletrobras to provide gas to the new plant. The letter added that the oil company was "very worried" by recent Aneel statements that it was counting on the plant starting to generate power this year.

In its third quarter results, Petrobras reported that it was owed 15.8 billion reais by Eletrobras, of which 8.6 billion was to be paid in installments.

Petrobras also informed Aneel that it could not, in any case, provide the Manaus plant with gas for its contracted operational life through 2043, because the concessions of the gas fields that would supply the generator end in 1933.

Petrobras Chief Executive Pedro Parente and Eletrobras CEO Wilson Ferreira said at the end of last year they were renegotiating the huge debt the utility had run up with the oil company.

Reporting by Luciano Costa; Editing by Anthony Boadle and Richard Chang

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