Reflections And Analysis On The Revision of Annex C of the ITAIPU Treaty

Reflections And Analysis On The Revision of Annex C of the ITAIPU Treaty Presented by: Dr. Oxilia Date: 5 May 2022 PIN18- 1040 Project - "Analysis of negotiating scenarios using multicriteria decision-making methods and game theory: revision of Annex C of the ITAIPU Treaty" International Cooperation - "Mapping the Renegotiation of the ITAIPU Treaty: Actors, Institutions, Negotiators and Community" Annex C - - IV. Income • 1. The annual income must be equal to the cost of the service. • 2. This cost will be distributed proportionally to the powers. V. Other provisions • The Administration Board, with the prior opinion of ANDE and ELETROBRAS, shall regulate the rules of this ANNEX. - VI. Revision • The provisions of this ANNEX shall be reviewed after a period of FIFTY YEARS from the entry into force of the Treaty, taking into account, among other concepts, the degree of amortization of the debts contracted by the IB for the construction of the development and the relationship between the powers contracted by the entities of both countries. Revision of Annex C of ITAIPU 2023 - Government at the Negotiating Table: 11% - THE GREAT CHALLENGE IS INTERNAL: 89% • ANDE, Companies, officials, institutions, Media, politicians, departmental and municipal governments, etc. • Political Agreement • Social Agreement 2020 IEEE Power and Energy Conference at Illinois - Zone Of Possible Agreement Paraguay Brazil Interests MAX utility MIN costs Reserve Points Status Quo Price Current Energy Auction Price - Paraguay negotiated with Brazil and Argentina; - Paraguay negotiated with Brazil and Argentina; Boundary Conflicts Br-Py - Brazil has shown interest in the hydroelectric potential of Salto del Guaira since the 1930s. - According to the 1872 Treaty, the area was owned by Paraguay. - 1964 Br&Py agree to tap the area's potential but a military coup changed plans - 1965 Brazil invades Port Renato creating a diplomatic crisis - . 1966 the YGUAZU Act is signed - 1973 the ITAIPU and YACYRETA Treaties are signed Tripartite Agreement - Argentina Brazil Paraguay - Year 1979 - The Tripartite Agreement represented a cession of negotiating positions by all parties: - The Corpus project with an elevation of 105 meters above sea level; - ITAIPU will be able to operate with flexibility with the following parameters: • Hourly level variation: 50 cm • Daily level variation: 2 m • Normal surface speed: 2m/s • Under unfavorable conditions, a 20% increase in these parameters may be allowed. • Operation with 18 units of 700 MW with a flow rate of 12,600 m3/s Tariff that boosts the productive and promotes energy transition - COMBINATION OF ENERGY AND DEMOGRAPHIC BONDS INDUSTRIALIZATION - JOB CREATION - SUBSTITUTION OF ENERGY SOURCES IN OUR ENERGY MATRIX MORE ELECTRICITY, LESS HYDROCARBONS ITAIPU Energy Contracting - Production • Equality • Art. XIII:  The energy produced will be divided equally to the two countries. • - - Right to acquire un consumed energy in its domestic market Contract • Long term • Duration of 20 years • Letter Of Agreement Letter commitment Obligation • ELETROBRAS • All power not contracted by ADE the ELETROBRAS should necessarily contract - Modality • Take or Pay • ANDE and ELETROBRAS are forced to pay withdraw or not energy associated with the contracted power In ITAIPU There Are: - - Potency • Installed power 14,000 MW • Power available for Recruitment 12,135 MW • Surplus power Types of energies • Guaranteed energy 75,000 GWh/year • Energy in added to the guaranteed energy • Energy associated with surplus power Reflections - Distribution of hydroelectric revenues in ITAIPU - Studying the opportunities of the Brazilian Electricity Market - What to do with the current electricity surplus? - Opportunity in 2023 - Convenient confusion: • - Paraguayan energy to Brazil. • - IB Tariff vs. Selling Rates (today's “cesión”) of The IB Tariff will be paid more and more by Paraguayans. Revising Exhibit C will not solve all the needs we have. It may HELP. But it is necessary, i.e., a fairer TAX system at all levels (national and municipal) and efficiency/transparency/effective control in public spending. SOME GENERAL IDEAS: - Shorter (every 10 years) periods for revision of annex c. - Maintain, at least in part, a fixed income for ib. - Explore, through IB, the commercialization of energy (surpluses) in other countries (lugo-lula agreement). But we need to study it further. - Breakdown of operating expenses (transparency-social control). - As far as the tariff is concerned, if the current structure were to be maintained... Strategy Scenario I: "Low IB rate". - Annex "C" remains current "We did not review" (15-16 USD/MWh) Impact • Paraguay will continue to receive what it currently receives. • Extraordinary income for the contracting companies. • and/or • LOW rates for the productive sector • SOCIAL Tariff for vulnerable sectors CUSE Restructuring - IB budget broken down in the new CUSE • Operation: RRHH and other Administration • Maintenance of facilities • Technological Updating • Reservoir Preservation - Environment • IB Social Responsibility Programs • + Strategic Projects