FYI




Orlando Gonzalez
05/09/2001 08:22 PM
To: Richard Shapiro/NA/Enron@Enron
cc: sergio.assad@enron.com 

Subject: recent news

I skipped your name on this one.  We are fully engaged on both these issues.  
---------------------- Forwarded by Orlando Gonzalez/SA/Enron on 09/05/2001 
16:26 ---------------------------


Orlando Gonzalez
09/05/2001 11:36
To: Rebecca McDonald/ENRON_DEVELOPMENT, John J Lavorato/Enron@EnronXGate, 
James A Hughes/ENRON_DEVELOPMENT
cc: Joe Kishkill/SA/Enron@Enron, sergio.assad@enron.com, Keith 
Miceli/Corp/Enron@Enron, Mark Metts/Enron@EnronXGate, Mitchell 
Taylor/Enron@EnronXGate 

Subject: recent news

Attached is the summary of Dennis Bakke's comments on AES investment plan for
Brazil.  Apparently these were  on CNN.  These are the same positions we and 
the
Investors Group have been discussing with government officials. 
 
 The second article is on the rationing situation which will result in cuts 
of over 20%
over the next 6 months.

We are preparing a summary of the impacts on our business for discussion 
with  
you this week.


AES Suspends Brazil Investments
US-based power company AES Corp. has put on hold plans to invest between
US$2 billion and US$2.5 billion on energy projects in Brazil, alleging that 
the
government,s policy on pricing is jeopardizing its operations.
AES President Dennis Bakke, on a brief visit to Brazil, said the company
suspended indefinitely its plans to build as many as 10 thermoelectric power
plants.
Bakke criticized Brazil's electricity sector regulator Aneel for maintaining 
an
energy policy that charged what Bakke said were ``unrealistically low prices 
for
consumers,'' forcing AES to carry the burden of rising costs.
He said investments would remain on hold until the government came up with
a solution.
AES has already invested US$6 billion in Brazil, primarily in electricity
projects, making it one of the country's top private foreign investors.

Energy Blackouts To Begin June 1
The government announced Tuesday that it will begin a policy of programmed
blackouts starting June 1 as part of its energy rationing plan.
Mines and Energy Ministry officials had at first hoped to delay any blackouts
until August, concentrating first on a program to induce consumers to reduce
energy use. The critical level of reservoirs in the country,s main 
hydroelectric
plants, however, forced Tuesday,s decision to accelerate the blackouts which 
will
last until the end of November when the rainy season begins.
The blackouts will occur in the Southeast, Central-West and Northeast regions
of the country. At the same time the government will introduce a program 
providing
incentives to consumers to reduce their energy use. The goal of the plan is 
to lower
electricity consumption by 20%.
Although the general outline of the rationing plan was announced Tuesday, the
details have yet to be worked out due to differences between the government
ministers who compose the National Energy Policy Council (CNPE). A new
meeting of CNPE was set for May 23 by which time it is hoped that an agreement
will have been reached on how to implement the plan.
The initial proposal from Mines and Energy was for a 15% reduction for
industry, 20% for residences and between 18% and 20% for commerce. The
ministries of finance, planning and development, however, asked for more time 
to
consider the impact of the energy cuts.
The principal concern among government officials is with the impact on the
economy of the proposed blackouts. According to a study to be released today 
by
the Get?lio Vargas Foundation, a 20% energy cut would slow economic growth by
1.5% of gross domestic product and would have a direct impact on 850,000 jobs.
Production costs for industry would rise 1.5%, government tax receipts would
decline by R$6.6 billion (US$2.9 billion) and Brazil,s trade deficit would 
increase
by US$1.6 billion, according to the study. The study,s authors also said 
there was
no guarantee that the effects of the program would be limited to this year.
Business leaders reacted with apprehension to the prospect of obligatory
blackouts. Most defended a policy of separate reduction goals for each 
industrial
sector, sparing industries that depend heavily on electricity. The S?o Paulo 
State
Federation of Industries (Fiesp) said that sectors who are major consumers of
energy such as steel should be exempted from any rationing.
While details were lacking in the government,s plan, officials said that the
administration of the energy cuts would be placed in the hands of local 
utilities
which would determine the locations and schedules for daily blackouts. 
According
to national energy secretary Afonso Henriques, a 20% reduction in consumption
would amount to a cut of six hours a day.
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