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Brazil power firms to get US$390mn of coronavirus relief

Bnamericas Published: Wednesday, April 08, 2020
Brazil power firms to get US$390mn of coronavirus relief

Electricity regulator Aneel authorized Brazil’s power trading chamber CCEE to use 2.02bn reais (US$387mn) to help companies mitigate losses stemming from lower consumption caused by the coronavirus pandemic.

The resources will come from the sector’s reserve fund for future burden relief. Specifically, 1.47bn reais will go to distributors in the regulated power market and 547mn reais will be shared among 7,166 free power market agents, which close power purchase agreements directly with customers. With Aneel’s decision, CCEE can make other disbursements throughout the year.

Brazil’s energy ministry and power firm associations have been discussing measures to maintain electricity companies’ financial health, as over-contraction of power generation causes concerns mainly for distributors. At least three distributors – Light, Equatorial Energia and Enel – have already tried to renegotiate supply contracts with generators using force majeure clauses. Brazil’s largest private generator, Engie, has already received some requests for load revisions.

“We are analyzing those requests very carefully, but most of them do not have good fundamentals and to use this force majeure clause the arguments need to be very well characterized. We are analyzing each case,” Engie’s commercialization director Gabriel Mann said during a conference call with analysts on Wednesday.

The country is also considering covering low-income consumers' residential bills. Aneel has already ordered distributors to uphold supply during the pandemic, even if clients stop paying their bills. More measures should be announced in the coming weeks and could include financing options with public banks.

“Distributors cannot be left alone in this situation, but those problems cannot spread out to the whole chain. We worry about not impacting other parts of the sector,” Engie’s president in Brazil Eduardo Sattamini said during the call.

One measure under discussion is allowing distributors to reduce supply payments to generators, which could receive a loan from development bank BNDES, while their generation concessions could be extended.

“If this is done as an option, it works. For some generators, if the returns are adequate, this would work as the purchase of a concession extension. But it might not work for all, so it has to be done selectively”, Sattamini added.

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