Boston, MA 04/23/2014 (wallstreetpr) – Brazil’s government has stepped in to take stock of the situation and help in controlling the situation by offering loans. As per a government announcement yesterday, Brazil’s Electric Energy Trading Board will distribute funds to the energy distributing companies. A loan of 11.2 billion-real ($5.1 billion) will be disbursed through 11 private banks and two state-run institutions to assist utilities.
ItauUnibanco Holding SA (ADR) (NYSE:ITUB) along with Banco do Brasil SA are part of the consortium which also includes Citigroup Inc. (NYSE:C), Goldman Sachs Group Inc. (NYSE:GS). , HSBC Holdings plc. (NYSE:HSBC), JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corp (NYSE:BAC) which are part of the deal as confirmed through e-mail by Brazil’s Finance Minister.
Loan details are expected to be finalized by CCEE, Brazilian Trading Board and respective banks by April 28. As per the decision of Electricity Regulator in Brazil, customers will be charged starting next year with the additional costs that the companies are currently incurring.
On 8th April, RomeuRufino, Head of Electric Regulator informed press that the loan amount has been increased from 8 billion as announced on 13th March for helping utilities distribution to current 11.2 billion reais. This enhancement in loan will reduce the treasury part of the aid.
Evaristo said. “During first three months, the thermal energy costs touched10 billion reais and we expect the rains might not bring any cheer to the current situation in the near future.” Should the April auction fail to meet the requirements, the loan amount might further be increased. Currently Loan number stands at 11.2 billion reais
Trader Prospective: Brazilian Energy Corp Petrobras can meet 50% Utilities’ demands
Petroleo Brasileiro Petrobras SA (NYSE:PBR), with its headquarters in Rio de Janeiro is a significant oil producer run by state. Petrobras’s plants currently have a surplus capacity of 1.4 gigawatts of thermoelectric Power to be sold to Brazilian Distributors as per EricoEvaristo, CEO of Bolt Comercializadora. As per an energy trading company, the bidding organized on April 30 can fulfill half the requirements of Brazilian Distributors as Petrobas has a huge surplus of electricity.
During a Telephonic Conversation from Sao Paulo, EricoEvaristo said, “CentraisEletricasBrasileiras SA (ELET3) along with CPFL Energia SA which currently possesses 345 megawatts available could reduce power utilities, and I expect Eletrobras to chip in with units. Luckily, all of them are state-run companies, and they have to sell at Government decided prices.”
It is a crisis as Power Distributing Companies like EletropauloMetropolitanaEletricidade de Sao Paulo SA and Cia Energetica de Minas Gerais are in a position of losing all the contracts. They have insufficient supply to meet the demands. Lack of Rains during the last 40 years has further worsened the situation as the Southeastern Dams lack right amount of water to produce electricity. It has hit rock bottom and one can remember year 2001 when Brazil had to restrict power usage.
Lack of Hydroelectricity has compelled Brazil to completely depend on thermoelectric Power generation which is high on costs. The spot power costs are also high when compared to Hydroelectric Generation.
