(Adds background on electric utilities' problems, extension of
payment deadline, stock prices, other details)
By Leonardo Goy
BRASILIA, July 10 Brazil's government is in
talks with commercial banks to lend at least 2 billion reais
($900 million) in emergency credit to electricity distributors
as drought causes power rates to soar, a source with direct
knowledge of the talks told Reuters on Thursday.
Without new capital, the utilities may be unable to pay the
1.3 billion reais they owe to the CCEE, the country's spot
market electricity clearinghouse. Brazil's energy regulator on
Wednesday extended the deadline for payment to the end of the
Brazilian electrical utility shares were up 1.5
percent in Sao Paulo at midday on Thursday. On the Sao Paulo
BM&FBovespa stock exchange, shares of Cia Energetica de Sao
Paulo were up 2.6 percent at 23.70 reais and Cia
Energetica de Minas Gerais SA shares were up 4.5
percent at 17.78 reais. Both were on track to be among the day's
A drought has reduced the power available from hydroelectric
dams, normally responsible for about two-thirds of the country's
electricity, against a backdrop of rising demand. Distributors
have had to buy spot market power, much of it generated by
expensive natural gas or fuel oil, to meet consumer obligations.
In peak periods, power in Brazil's southeast-central west
region CCEE-HVYSE-PLD1 rose to 564.61 reais per kilowatt hour
last week, more than three times the average of the last five
The loan talks come as cash from a 11.2 billion real ($5.06
billion) loan extended in April has run out. Energy Ministry
officials were not immediately available for comment on
Thursday. Representatives of Brazil's electrical energy
regulator, Aneel, had no comment.
Brazil's electricity industry is facing its biggest crisis
in more than a decade. In 2012, hydroelectric generators were
forced by the government to slash rates, reducing revenue for
Meanwhile, low water levels have driven up the cost of
alternative power, crimping the cash flow of distributors who
can only pass on higher costs to consumers at once-yearly rate
reviews overseen by a government wary of boosting inflation.
Government auctions to build new, cheaper generation
capacity have been delayed, sometimes by years, and licenses for
power lines to connect new power plants to the grid have been
held up, driving more utilities to the spot market.
Analysts believe that the country faces power rationing by
the end of the year if water levels do not rise soon.
Water levels in Brazil's southeast-central west and
north-eastern regions, which contain the majority of Brazil's
population and electricity demand, are at their lowest since
2001 when the country was forced to ration power.
If granted, the new loan, like the previous credit, will be
made to the CCEE - a nonprofit organization controlled by the
power generators and distributors who use it.
($1 = 2.2140 Brazilian reais)
(Additional reporting by Jeb Blount; Writing by Guillermo
Parra-Bernal and Jeb Blount; editing by Jeffrey Benkoe and