Rio de Janeiro, January 13 2005 – PETRÓLEO BRASILEIRO S/A - PETROBRAS, [Bovespa: PETR3/PETR4, NYSE: PBR/PBRA, Latibex: XPBR/XPBRA], a Brazilian international energy company informs that in relation to the consortium contract and a connected contract denominated the “Participation Agreement” signed with Termoceará
Ltda. (MPX) for the construction, operation and sale of energy generated by the Termoceará Thermoelectric Power Plant (UTE), it today obtained an interlocutory court injunction from a Rio de Janeiro civil court. The injunction ruled in favor of the suspending of the Petrobras’ Contingency Payment, conditional on a court deposit of the value demanded by Termoceará Ltda (MPX), to be held until the installation of the respective arbitration tribunal.
Petrobras has already lodged the deposit in the required amount of the Contingency Payment, pledged to the courts and the Arbitration Tribunal to be installed.
Under the above-mentioned contracts, Petrobras and MPX agreed to construct, operate and sell the energy generated by the UTE Termoceará.
According to these contracts, in the event of the plant’s revenues being insufficient to cover the power plant’s costs during certain periods, Petrobras would be called upon to make a cash contribution known as a “Contingency Payment”.
Due to the structural changes in the market, Petrobras is being called upon to constantly make the so-called “Contingency Payments”. In these circumstances, this eventual liability has become a permanent one, creating an excessive financial burden for Petrobras. On the other hand, this situation is an extremely advantageous one for MPX, since should the situation persist, on the expiry of the contract, the company would become the owner of a power plant amortized from the “Contingency Payment” contributions made by Petrobras.
For about ten months now, Petrobras has been endeavoring to reach an amicable solution to this situation – however, without success to the present. For the period that has elapsed under the contract to December 2004, Petrobras has already disbursed approximately US$ 100 million. The Company’s total exposure up to the final contractual expiry date, should continued monthly “Contingency Payments” be considered valid, would be in the region of US$ 325 million.
Yesterday, in compliance with the contractual provisions, Petrobras notified MPX to proceed with the negotiations pursuant to the procedures provided for in the contract with the purpose of reaching an amicable solution. For Petrobras, this remains the preferred outcome in spite of the favorable ruling obtained today in the courts.
Negotiations are proceeding, Petrobras’ objective being to reach an agreement in accordance with usual business practices. Should this prove impossible, pursuant to the contract, Petrobras will maintain its request for the installation of an arbitration tribunal to resolve the dispute in a final and conclusive manner.