"Dark" Days Ahead: Main Power Supplier For Brazil Olympic Games Pulls Out

Back in July, we asked if Olympians at the upcoming summer games in Rio would be swimming in feces. “Extreme water pollution is common in Brazil, where the majority of sewage is not treated. Raw waste runs through open-air ditches to streams and rivers that feed the Olympic water sites,” AP explained. “As a result, Olympic athletes are almost certain to come into contact with disease-causing viruses that in some tests measured up to 1.7 million times the level of what would be considered hazardous on a Southern California beach.”

Obviously, spending billions on modernizing the country’s basic sanitation infrastructure isn’t in the cards now that the government is mired in a fiscal crisis and desperately needs to cut spending in order to hit what certainly look like unrealistic primary surplus targets. 

We’ve long predicted that the country’s economic and political strife would end up having an adverse impact on the games and sure enough, we found out earlier this month that athletes in Olympic village will be asked to pay for their own air conditioning and will not have televisions in their rooms. In short, organizers can no longer depend on the government (and who knows what the government will look like by the time the games commence) to fund cost overruns. That means spending only as much as Brazil expects to take in from sponsorships, ticket sales, and a grant from the International Olympic Committee. 

Apparently, the games were already some $520 million over budget. The government was supposed to cover that (and more) but obviously that’s out of the question given Brazil’s worsening fiscal crisis. “By the time the Games begin, the committee plans to have 500 fewer paid staff than the 5,000 it originally expected,” Bloomberg said, adding that “the deepest cuts will probably come from operational areas like catering, transportation and cleaning services.”

Well, if you thought all of the above was bad, consider that now, a major supplier of power has reportedly backed out of the event, suggesting that in addition to unsanitary conditions and no air conditioning, athletes could well run out of energy - literally. 

As Reuters reports, “longtime Olympic power provider Aggreko has pulled out of a tender to supply generators for the games in Rio de Janeiro next year, dealing a major blow to organizers rushing to secure an energy source for the world's largest sporting event.”

With Glasgow-based Aggreko, it’s the experience that counts. The company has helped power nine Olympics and six World Cups and although Rio 2016 spokesman Mario Andrada told Reuters he was comfortable with the companies still competing for the tender, some say he probably shouldn’t be. 

"There is increased risk of it going to someone who doesn't have the experience. Are there people out there with enough equipment? Probably. But in terms of the operational side of things, Aggreko are pretty good at this," said Will Kirkness, an analyst at Jefferies.

While Aggreko didn’t give a reason for pulling out, Reuters suggests they may have become exhausted with the planning process which, if you go by the 2012 London games, is behind by about 12 months.

Of course it’s also likely that Aggreko worried it wouldn’t get paid. As noted above, and as we discussed two weeks ago, the government can’t fund cost overruns, which means that if the planning committee exceeds the budget, it’s not clear who would cover the bill. 

More worrisome is that “the temporary power contract guarantees a stable and secure energy supply for international broadcasters.” Interruptions in coverage mean lost ad impressions and if advertisers and sponsors become concerned that Brazil will ultimately be unable to deliver, they could begin to rethink their commitment. 

Additionally, one has to wonder how long it will be before fans begin to rethink their plans to attend.

After all, no one wants to go to an opening ceremony where the only light is the Olympic torch.