This excerpt taken from the PBR 6-K filed Mar 18, 2005.
(i) Thermoelectric plants of the merchant type
PETROBRAS understands that the economic and financial equitability of the agreements involving Macaé Merchant and Termoceará thermoelectric power plants has been seriously impacted, considering that, under the related contractual conditions, these contributions should be made occasionally rather than permanently and regularly, which has been the case as a result of a structural change in the market, thereby being excessively costly to the Company.
Negotiations have been conducted with El Paso, operator of the Macaé Merchant thermoelectric plant, and with MPX with regard to Termoceará, expecting these disputes to be resolved amicably; however, should this expectation not materialize, PETROBRAS will adopt the applicable legal procedures with a view to definitely settling these disputes.
Supported by current legislation, PETROBRAS obtained a favorable injunction authorizing the amounts payable to Termoceará, owned by MPX, to be deposited in court. However, this injunction was later annulled by a lower court decision. PETROBRAS has also filed a request for suspension of payments to Macaé Merchant, owned by El Paso, but a lower court decision was unfavorable to the Company. Considering that the court decisions obtained do not allow judicial deposits, PETROBRAS will seek to made deposits at a court of arbitration.
It should be noted that the judicial decisions obtained to date refer only to the preparatory stage to the main cause, which should be resolved by arbitration, with the grounds of action being fully considered. Accordingly, the outcomes obtained so far do not indicate actual losses on the cases and should be considered as possible losses.
The acquisition of Eletrobolt, as mentioned in Note 9, caused all contingent payments in connection with this thermoelectric plant to be ceased.