(Rio de Janeiro, February 1, 2005). – PETRÓLEO BRASILEIRO S/A - PETROBRAS, [Bovespa: PETR3/PETR4, NYSE: PBR/PBRA, Latibex: XPBR/XPBRA], a Brazilian international energy company, informs that it signed a consortium contract and associated participation agreement with El Paso to operate the Macaé Merchant Thermoelectric Power Plant on a joint basis.
During the course of these contracts, the so-called “Contingency Payment”, to be paid by Petrobras from time to time according to need, has become permanent - reflecting structural changes in the market – and thus excessively onerous to the Company, provoking an inequitable financial and economic relationship between the parties to the contract.
In the light of this situation and after lengthy discussions to solve the question, on January 11 2005, Petrobras notified El Paso as to the extreme and undue burden it is currently bearing.
The Company announced its intention to negotiate a solution to the dispute on an amicable and
once and for all basis. Should a negotiated solution prove impossible within 30 days, Petrobras
will submit the dispute to arbitration as contractually provided.
To guarantee rights and obligations of both Petrobras and also El Paso, the Company also requested a court injunction, suspending the above mentioned Contingency Payment against the deposit of a court deposit of the value allegedly still payable. Given that the injunction has been subsequently rejected, Petrobras is now studying appropriate measures to ensure that its contractual and legal rights are protected. The Company understands that it is in no way failing to comply with its obligations in seeking both through negotiation (based on the provisions of the law and contractual rules and term) and also litigation (according to its established legal rights) to safeguard its legitimate interests.
Contingency payment: Macaé Merchant Thermoelectric Power Plant