Bloomberg News

Tractebel Rating Cut by Itau on Rising Costs for Amazon Dam

February 09, 2012

(Updates with project costs in second paragraph, analyst comment in fourth paragraph.)

Feb. 9 (Bloomberg) -- Tractebel Energia SA, Brazil’s fourth-largest electricity company by market value, had its rating lowered by Banco Itau BBA SA on rising costs to build the Jirau power dam in the Amazon.

Itau trimmed the rating to “market perform” from “outperform” after the utility’s parent increased estimated investments for the project, analysts Marcos Severine and Mariana Coelho said in a report to clients dated yesterday. International Power Plc, a unit of GDF Suez SA that controls Tractabel, increased the investment estimate 21 percent to 15.1 billion reais ($8.8 billion), the analysts said.

The 3,750 megawatt project in the world’s biggest rainforest has been delayed by worker strikes and environmental protests over the past year. The Brazilian government last year asked companies to avoid delays in the construction of the dam, which was scheduled to be completed this year.

“We understand that 2012 is the time to assess Jirau’s return and equity value and price them into Tractebel’s valuation,” the Itau analysts said in the report.

--Editors: Carlos Caminada, Dale Crofts

To contact the reporter on this story: Rodrigo Orihuela in Rio de Janeiro at rorihuela@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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