SAO PAULO/RIO DE JANEIRO, April 25 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
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
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
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.
The current drought, one of the worst in eight decades, has
seen hydroelectric dam levels drop to some of their lowest in 15
years, forcing the use of more costly nuclear and fossil fuels.
The lack of alternatives to hydropower generation is the
result of a failure to hold auctions for new long-term
generation capacity and delays in building new plants and
electricity transmission lines.
Banco do Brasil and Caixa will each provide 2.45 billion
reais and Bradesco and Itau-Unibanco will each provide 2 billion
reais for the loan.
Spain's Banco Santander SA will provide 1 billion
reais, Citigroup Inc will finance 500 million reais,
Brazil's BTG Pactual will provide 400 million reais
and J.P. Morgan Chase & Co and Credit Suisse
100 million reais each.
($1 = 2.24 Brazilian reais)
(Reporting by Anna Flavia Rochas in Sao Paulo and Jeb Blount in
Rio de Janeiro; editing by Andrew Hay)