UPDATE 1-Brazil AES Eletropaulo sees risk of 'financial collapse'

miércoles 11 de mayo de 2016 12:59 GYT

(Adds data, details on sector)

SAO PAULO May 11 (Reuters) - Brazilian power distribution company Eletropaulo Metropolitana Eletricidade de São Paulo SA risks "financial collapse" if rules governing power purchasing contracts are not changed, it said in a letter to regulators last month.

AES Eletropaulo, as the company is known, said in the letter dated April 11 it is accumulating losses due to current contract rules that prevent it from reducing the amount of electricity it buys from generators. The company, a subsidiary of U.S.-based AES Corp, is selling excess supply at a loss in the spot market.

Asked to comment about possible developments since the letter was sent, AES Eletropaulo said it has not been informed of any regulatory modifications to date. Brazil's electricity watchdog Aneel, which released the letter on its website on Wednesday, did not immediately respond to a request for comment.

Other power distribution companies in Brazil are facing similar problems as consumption falls amid the country's worst recession since the 1930s and power sector regulations fail to address smaller-than-projected demand.

The nation's power consumption fell 4.2 percent in the first quarter from the same period a year earlier.

Power distribution companies have long-term contracts including fixed amounts of power deliveries. The cost of excess supply of up to 5 percent can be passed on via tariffs but beyond that, the only option is selling the excess power on the spot market at a loss.

Last month, AES Eletropaulo sold excess supply at around 48 reais ($13.7) per megawatt hour (MWh) on the spot market. It paid the generator 147 reais per MWh for the electricity.

The company had 5.9 percent of leftover electricity in the first quarter and losses from selling on the spot market amounted to 40.3 million reais.   Continuación...