RIO DE JANEIRO, Nov 5 (Reuters) - Eletropaulo Metropolitana SA, the Brazilian utility controlled by U.S. power company AES Corp, said on Wednesday that third-quarter profit rose nearly five-fold as the company sold excess energy on the spot market at prices driven higher by drought.
Net income jumped to 130.6 million ($52 million) reais in the quarter from 27 million reais a year earlier, the Sao Paulo-based company said in a statement filed with Brazil’s securities regulator, the CVM. The third-quarter profit also reversed a second-quarter loss of 354.4 million reais.
Net sales rose 32 percent from a year earlier to 2.93 billion reais, boosted by higher prices paid for excess power on Brazil’s spot market. Prices have soared in the last year as Brazil suffered through its worst drought in 80 years.
The drought has caused water levels in hydroelectric reservoirs to shrink to their lowest levels in at least 15 years, forcing the use of higher-priced power from natural gas and petroleum.
With about two-thirds of Brazil’s power normally coming from cheap hydroelectricity, the scarcity caused by the drought drove the price of hydro alternatives higher still.
The soaring costs have pushed Brazilian utilities and power generators without secure access to alternative power to near bankruptcy and have forced the government to come up with more than $13 billion in emergency loans to help the affected companies pay for power.
As a result, the Brazilian electricity sector has lost its financial independence and is now dependent on Brazil’s Treasury, the head of the country’s federal audit court said on Oct. 1.
Eletropaulo, which serves more than 20 million people in Metropolitan Sao Paulo, South America’s largest and most industrialized urban area, was forced to pay more for some power. But a slower economy and weak industrial activity during the 2014 soccer World Cup allowed the company to sell surplus power at profit.
It had a surplus because it had contracts to buy 5.2 percent more energy for clients in its service area than it actually needed in the third quarter.
Eletropaulo also managed to bolster results by controlling costs, causing earnings before interest, taxes, amortization and depreciation, or EBITDA, to nearly triple to 422.1 million reais.
EBITDA is a measure of a company’s ability to generate cash from operations.
$1 = 2.5134 Brazilian reais Reporting by Jeb Blount; Editing by David Gregorio