Rousseff rejects electricity price spike fears

Tuesday, August 5, 2014

Brazilian President Dilma Rousseff has played down fears of an imminent spike in electricity prices as distributors grapple with soaring wholesale energy costs.

Her comments come a week after the government pledged a second multibillion-dollar bailout to distributors in less than four months.

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"Several assumptions have to be made," Rousseff was quoted saying Tuesday by newspaper Valor Econômico during a speech in the northern city of Altamira.

"It's very difficult to establish what the impact on the rate will be. We are a country that is susceptible to water [supply]."

The latest 6.5bn-real (US$2.9bn) compensation package – expected to be delivered later this month – follows an initial 11.2bn-real payout in April.

National power regulator Aneel is in talks with local development bank BNDES and other lenders to finalize financing terms for drought-stricken power firms.

"I want to clarify to the population there is no need to be pessimistic," Rousseff said.

"Even if you consider the loan installments, they will not be repaid in a year. They [distributors] will have three years. Let's take it easy. No calculation can be made based on assumptions."

Brazil's power distributors are currently reliant on expensive spot market purchases from thermopower plants to make up for dwindling hydroelectric output.

Thermoelectricity in Brazil costs up to six times as much as hydropower, which accounts for more than two thirds of the country's installed capacity.

Analysts say concerns about power shortages and the prospect of higher electricity prices loom as a major theme ahead of the October 5 presidential election.

BNamericas will host its fourth LatAm Power Generation Summit in Santiago, Chile, on August 13-14. Click here to download the agenda.