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Brazil's BNDES considers emergency loan to utilities- source
January 9, 2015 / 8:48 PM / in 3 years

Brazil's BNDES considers emergency loan to utilities- source

BRASILIA, Jan 9 (Reuters) - Brazil’s state development bank BNDES is willing to make an emergency loan to ailing electricity distributors as long as two other state-run lenders join the operation, a senior bank executive told Reuters on Friday.

BNDES, Banco do Brasil SA and Caixa Economica Federal SA should each contribute equally to a 2.5 billion real ($948.91 million) loan to help the utilities pay for high power prices, the BNDES executive said on condition of anonymity.

The worst drought in 80 years and the government’s failure to auction sufficient new generation rights has caused utilities’ costs to soar. Without the 17.8 billion reais ($6.76 billion) of emergency credit already arranged for the distributors from private and government banks last year, much of the industry would be bankrupt.

“The bank is willing to participate but if we (state banks)all participate equally,” said the executive. Banco do Brasil and Caixa Economica declined to comment.

Already unable to pay current costs, Brazil’s energy regulator plans to extend the deadline for utilities to pay for November and December power purchases until the end of January, giving more time to arrange an emergency loan.

Although the loan would not come directly from the government coffers it highlights the pressure President Dilma Rousseff is under to help an industry that is facing its biggest crisis in over a decade.

New Finance Minister Joaquim Levy has said the government will no longer compromise its finances to aid distributors. He said costs should be shared with consumers.

Low water levels throughout 2014 have undermined a system that gets more than two-thirds of its electricity from hydropower. This has driven up the cost of alternative power, and squeezed distributors’ cash flow. They can only pass higher costs onto consumers once-a-year after rate reviews by a government wary of boosting inflation.

In Brazil’s southeast and central west, a region responsible for 70 percent of the country’s hydroelectric generation and the bulk of its use, water levels are at less than 20 percent of maximum, the lowest level for January in at least 15 years and below levels that led to rationing in 2002.

Brazilian electrical-utility shares fell nearly 5 percent in Sao Paulo on Friday on the Sao Paulo BM&FBovespa stock exchange. Shares of Cia Energetica de Sao Paulo dropped 1.36 percent to 22.54 reais and Cia Energetica de Minas Gerais SA slid 4 percent to 11.76 reais. ($1 = 2.6346 Brazilian reais) (Reporting by Alonso Soto; Additional reporting by Aluisio Alves; Editing by Jeb Blount and Diane Craft)

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