Brazil electricity group signs $4.8 bln loan to rescue utilities
SAO PAULO/RIO DE JANEIRO, April 25 (Reuters) - Brazil's electricity clearinghouse signed a loan for 11.2 billion reais ($4.81 billion) with 10 banks as part of a government-led rescue of utilities facing financial woes as a drought saps hydroelectric power, pushing up electricity prices.
The loan will help finance purchases of power by distributors and is being offered by a consortium of Brazilian banks led by state-run Banco do Brasil and state-owned Caixa Economica Federal. Those two banks plus Brazilian investor-owned Banco Bradesco SA and Itau Unibanco SA will provide more than half the financing.
The 42-month loan comes due in October 2017. It will pay interest equal to the Brazilian "CDI" overnight-interbank rate plus 1.9 percentage points, or about 12.7 percent a year at the current annual CDI rate of 10.8 percent.
The clearinghouse, known by its Portuguese initials CCEE, sets the spot price for excess Brazilian generation capacity sought by distributors to meet their obligations to industry and consumers.
The loan became necessary after the cost of spot-market power in Brazil surged to a record 822.83 reais ($366.70) per megawatt-hour (MWh) in January, the legal maximum in Brazil. The estimated cost to utilities of this power is greater than the industry's entire cash flow.
For most of the last 10 years, spot-power rates have been below 120 reais per MWh, less than a third of current rates.
The loan will be repaid through electricity rate hikes starting in 2015 on industrial and residential consumers. Utilities have been unable to pass on the immediate cost of more expensive power because rates are only reset once a year by the government.
The CCEE is a non-profit agency with no capital and some in Brazil believe it has no legal standing to take out loans. Three CCEE directors resigned from the agency's board earlier this week to protest the financing, which the government of Brazilian President Dilma Rousseff has used as a lifeline for the country's electricity system.
The loan is being guaranteed by a government fund financed by taxes on electricity bills. Continuación...