The group said in a statement that CESS, an affiliate of Suez Energy South America, had signed the loan agreement with Banco Nacional de Desenvolvimento Economico e Social (BNDES) to fund two-thirds of the project costs.

Suez said the 14-year term financing organised via BNDES for the 241MW hydro project is in two parts – one third by a direct loan of Euro68.7M (US$91.5M), and two-thirds by indirect, bank syndicate funding of Euro137.5M (US$183.2M). The syndicate banks providing the additional funds are Unibanco, Bradesco, ItauBBA, BSCH-Santander, and Votorantim.

The Sao Salvador project is the first power project to benefit from the new financing support arrangements that have been initiated to help Brazil’s electricity liberalisation and expansion programme.

Suez won the concession for Sao Salvador under the new system in 2001, and last October it signed auction deals to sell 148.5MW of guaranteed power to distribution companies. The 30-year Power Purchase Agreements (PPAs) start from the completed date of the project, due 2011.

The group’s Brazilian subsidiary, Tractebel Energia, began construction work on the Sao Salvador project on Tocantins river, between the states of Tocantns and Goias, last year. The project is budgeted to cost almost Euro307M (about US$410M) in total.

Suez said it wants to ‘develop Sao Salvador as fast as possible’. It added that if the project is commissioned before the PPAs come into force then the output will be sold to Tracebel Energia’s customers and on the open market.

Separately, Tractebel Energia is also investing in improvements at the Salto Osorio plant and a 40% expansion of the 1087MW Estreito plant.