August 6, 2015 / 12:11 AM / 4 years ago

Eletrobras to pay Petrobras in debt settlement, government says

BRASILIA/SAO PAULO, Aug 5 (Reuters) - Brazil’s two largest energy companies, Eletrobras and Petrobras , settled a quarrel on Wednesday worth billions of dollars in late payments for fuel supplies, the government said.

Brazil’s Energy Ministry said Centrais Eletricas Brasileiras SA, as Eletrobras is known, will pay Petrobras a bill that at one point late last year was estimated at around 8.6 billion reais ($2.47 billion) related to the supply of fuels for several thermal power plants over some years.

The government, which controls both power company Eletrobras and oil company Petrobras, did not provide an updated figure for the current size of the debt, saying only that it will be paid in 36 monthly installments adjusted by the country’s reference Selic rate, currently at 14.25 percent per year.

The deal is a major step taken by the government to address huge debts created during Brazil’s worst energy crisis in 15 years, as expensive thermal power plants were used nonstop for at least two years to guarantee supplies while a severe drought cut hydro plants’ reservoirs.

The settlement should also help the battered finances of Petroleo Brasileiro SA, as the oil company is formally known.

“This renegotiation will provide Petrobras with a regular flow of payments,” Brazil’s energy minister, Eduardo Braga, told reporters in Brasilia.

Petrobras had threatened to sue Eletrobras due to the fuel bills in arrears.

The money for the deal, which includes another settlement of debt, will come from the CDE, a fund fed by extra payments imposed to every power consumer in the country in their monthly bills.

The other settlement is for a large debt once estimated at around 7 billion reais ($2.01 billion) with power distributors in northern Brazil.

These companies had to guarantee power supplies to consumers during the crisis by buying very expensive energy from thermal generators when spot power prices were at record highs due to a drought that had crippled the main hydroelectric reservoirs.

Some of these distributors are controlled by Eletrobras, which was pressing the government to first solve the distributors’ problem before it settled its bill with Petrobras.

This is one reason power bills in Brazil increased around 50 percent in the last two years, fueling discontent among citizens and businesses with the government.

The situation is slowly improving in Brazil as welcome El Nino rains replenish reservoirs, helping to reduce power generation costs.

But the debts left by the crisis will still hang over consumers bills for some time.

(1$ = 3.48 reais)

Writing by Marcelo Teixeira; Editing by Leslie Adler

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