An energy sector analyst, who asked to remain anonymous because his job requires him to negotiate with public sector authorities, analyzed the dispute that last week faced the Chief of Staff, Javier Gimenezand to the Minister of Industry, Marco Riquelmewith the head of the ANDE, Felix Sosaafter he revealed that the cost of electricity generation in the country will gradually rise to US$ 50 per megawatt/hour (MWh) in 2043.
Atome, for his part, claim a fee fixed US$30 per MWh for 15 years (of which, 4 to 5 years it will not use because it will still be under construction) for its green fertilizer plant in Villeta. If ANDE’s real generation cost will exceed that figure long before the requested deadline ends, the analyst maintains, the request is “technically and financially unfeasible” for the state company.
According to the specialist, 2027 marks a breaking point. Remember that the Itaipu triennial fee expires this year and it is not yet known what the amount to be paid later will be. Although, according to the 2024 understanding with Brazil, this price must drop to cost – in accordance with what is established in the Annex C of the Treaty of Itaipu-.
Likewise, at the end of 2026, the call falls Operating Agreement with Brazil, which until now allows ANDE to have preference in the withdrawal of surplus (non-guaranteed) energy from Itaipú and obtain a lower cost. “Regardless of who wins the elections in Brazil, there will be no continuity of that agreement,” the source said.
From that moment on, ANDE would have to pay a higher rate for Itaipu’s energy, and something similar could happen with Yacyretá. The analyst stressed that neither of these two binational rates “will be fixed for 10 or 15 years,” but rather will be updated over time.
Added to this is another factor: the rates agreed in dollars are adjusted, in practice, according to the US inflation. For this reason, he warned, “a fixed rate cannot be set for a long time, under any value,” neither for Atome nor for any other electro-intensive company.
What Atome has already achieved
The project of Atome PLC in Villeta—budgeted in about US$665 millionaccording to the company itself—already has consolidated profits that, for the analyst, should weigh in the negotiation.
The first is that the plant operates under the regime of free zonewhich grants advantages such as the payment of 0.5% tax on income from export sales to third countries, among others.
Read more: Atome agrees to sell all its production to a Norwegian company
The second is commercial: on the use of green fertilizers in Paraguay to replace imports, which Spalding highlights, contradicts the fact that Atome has already signed with the Norwegian Yara International a binding agreement for 10 years to sell you 100% of the plant’s projected production. There is talk of between 260,000 and 264,000 tons of nitrogen fertilizer per year, which Yara will distribute primarily to markets such as the European Union.
For the analyst, this contract should be a starting point for new conditions: “The minimum is demand that Atome first commit to serving the domestic market Paraguayan, at a value that is not higher than that of the local market.”
He also suggested that the company should reinvest at least 50% of your profits in the countrymainly in alternative sources such as biomass and solar energy, and noted that, unlike cooperation agreements such as those between Paraguay and Taiwan, Atome did not assume commitments of transfer of technology.
How much energy in exchange for how many jobs?
Another axis of the analysis is the relationship between energy consumed and employment generated. The specialist compared the total consumption of the Paraguayan manufacturing industry — which, according to his own calculations, is around 1,000 MW of power to sustain a sectoral GDP of about US$ 10,000 million and more than 380,000 jobs — with Atome’s initial demand, which he estimated to be equivalent to around 10% of that power for a significantly smaller number of jobs.
Minister Riquelme, for his part, publicly defended the tariff concessions, citing as an example the large paper mills installed in Uruguay, which according to him “changed the economic reality” of that country. The analyst questioned the comparison and proposed another: the pulp mill Paracelunder construction in San Pedro, which – as indicated – will generate its own energy from biomass and sell the surplus to ANDE, instead of demanding energy from it at a preferential rate.
The specialist also recalled the history of Rio Tinto Alcanthe aluminum smelting project that was discussed in Paraguay for years and ended up being shelved in 2013, in the midst of a strong debate about whether it was appropriate to grant subsidized rates to an electro-intensive industry with low impact on local employment.
Read more: Atome awaits ANDE’s proposal on the energy rate, after the Government backed down
A possible way out: night rate and reinvestment
Far from proposing to close the negotiation, the analyst proposed an alternative scheme. ANDE could commit to selling energy to cost price—never a fixed rate—between 10:00 p.m. and 6:00 a.m.that is, outside the peak residential consumption hours, but only after the renegotiation of Annex C has been closed.
In exchange, Atome—or any other electro-intensive company—should invest in alternative own generation within a period of five yearsand the rate should be readjusted each year according to the real price of Itaipu energy and/or inflation in the United States. As a general limit, he proposed that ANDE not allocate more than 20% of your available hydroelectric energy to electro-intensive industries, and only at night, “without compromising the service to families.”
What Atome says
On the company’s side, its representative in Paraguay, James Spalding —former head of Itaipú—, maintained in his latest statements that Atome “is going to leave everything on the court” in the negotiation and demanded a “predictable” agreement that does not change “the rules of the game in the middle of the game,” arguing that legal certainty is key to repaying the project debt within a period of ten years.
Read more: Atome and the fixed rate: three voices and two opposing positions in the Government
For now, the company is awaiting a new formal proposal from ANDE after the repeal of the decrees that guaranteed the fixed rate, in the midst of a negotiation that within the Government itself generated completely opposing positions.
