Brazil pledges US$5.59bn "lifeline" to power distributors

Friday, March 8, 2013

The Brazilian government has described an 11bn-real (US$5.5bn) funding pledge as a "lifeline" to struggling power distributors amid tumbling revenue and soaring generation costs.

Federal gazette Diário Oficial da União said Friday (Mar 8) utilities would gain access to low interest credit from the CDE industry development account.

"We are providing a lifeline to electric energy distributors to benefit all Brazilian consumers," energy minster Edison Lobão said during a press conference in Brasília.

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Brazilian electricity distributors association Abradee says utilities have lost 5bn reais since October due to government-enforced revenue cuts and high thermoelectric generation costs as drought reduces hydroelectric output.

According to national treasury secretary Arno Augustin, up to 11bn reais have been made available through the collection of electric sector fees.

Lobão blamed the dire plight of distributors on the refusal of Cesp, Cemig (NYSE: CIG) and Copel to renew power generation concessions expiring between 2015 and 2017.

He said the move meant distributors now had to purchase energy at higher prices on the spot market.