Brazilian companies cut output, sell power instead in weak economy
By Reese Ewing
SAO PAULO Dec 3 (Reuters) - In a sign of the distortions plaguing Brazil's stagnant economy, a wide range of companies are sharply cutting back output of their main products to instead sell electricity back into the national grid because it is more profitable.
The trend includes sugar, ethanol, steel, aluminum and chemical companies, a Reuters analysis of company earnings statements and other guidance shows.
Tax incentives and historically high electricity costs mean Brazilian factories are more likely than their peers in many other countries to produce their own energy. They sometimes burn biomass or use gas or even privately built hydroelectric dams.
Under normal circumstances, the companies direct as much of that energy as possible to production of their core product, while selling whatever excess they have into the national grid through the spot market.
That hasn't been the case lately, though.
Usiminas, Brazil's biggest producer of flat steel, said in its latest earnings report that revenues from electricity sales reached 288.4 million reais ($112 million) in the first nine months of 2014, up from just 13.6 million reais in the same period last year.
The company's raw steel production, however, fell 10 percent over the same period.
Brazil's slow economy partly explains why. Continuación...