Brazil vows power rates will fall despite resistance - paper

Wed Nov 14, 2012 6:43am EST

Related Topics

* Mantega says gov't will "somehow" push energy prices down

* Energy firms seek privileges, shares will recover, he says

* Rousseff's plan key to keep inflation in check in 2013

RIO DE JANEIRO, Nov 14 (Reuters) - Brazil's Finance Minister Guido Mantega vowed electricity rates will fall next year even if power companies resist a government plan to cut energy costs to consumer and business users.

In an interview published Wednesday in the Valor Economico daily, Mantega said Brazil "cannot wait until 2015 or 2016" to cut electricity prices, a move he considers essential to boost the competitiveness of the country's industry.

President Dilma Rousseff in September asked power companies to slash their rates by an average 20 percent or risk the loss of their operating licenses, or concessions, when they expire in coming years.

The companies have the right not to renew their concessions right now, keeping their current energy tariffs. In that case, Mantega said, the government will "somehow" make sure energy prices will fall next year. He said the Treasury could be involved in such an action, but provided no specifics.

Rousseff's plan has knocked down shares of power utilities and greatly upset energy investors, some of them have accused the government of trying to break their concession contracts.

Large energy companies such as Cemig, Cteep , and Cesp have threatened or already decided not to renew their concessions.

Lower energy prices are crucial to ensure inflation remains in check next year, making room for the central bank to keep its benchmark interest rate at an all-time low for longer.

The central bank has estimated that lower electricity costs next year could trim about half a percentage point off inflation, which is running at 5.45 percent in the 12-month period to October. That is well above the center of the government's target of 4.5 percent, plus or minus 2 percentage points.

Mantega said that, by refusing to adhere to the government plan, some firms are trying to keep their "privileges," forcing the population to pay unfairly high energy prices.

He said the recent plunge in energy share prices is a "market problem," probably caused by fund managers who "misguided" their clients.

"I'm sure share prices will recover. Right now, they're pricing in this (plan). Soon, what will matter is the company's efficiency, its EBITDA, its expansion outlook," Mantega said.

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