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Brazil's Cemig may need to put $443 million into distribution unit
August 28, 2017 / 9:07 PM / 3 months ago

Brazil's Cemig may need to put $443 million into distribution unit

SAO PAULO (Reuters) - Brazilian electricity firm Cemig may need to inject 1.4 billion reais ($443.64 million) into its power distribution unit to comply with financial requirements laid out by industry regulator Aneel, according to a document seen by Reuters.

Aneel found in an inspection of 33 distributors that Cia Energetica de Minas Gerais SA, as the company is formally known, would need to contribute the funds to its Cemig-D unit in order to meet financial sustainability requirements for 2016.

For firms that fail to meet the target, Aneel caps dividend payouts at 25 percent of net income, while missing the target for two consecutive years could result in a distributor losing its concessions.

Aneel’s inspections found that 15 electricity distributors failed to meet the requirements for 2016, with Cemig-D registering the largest shortfall.

Covering the shortfall could further stress Cemig, Brazil’s most indebted major power utility, as it seeks to refinance 4.1 billion reais in debt maturing this year and cut capital spending after losing the licensing rights for several hydropower dams.

Southern Brazil’s CEEE-D ranked second requiring 865 million reais and Parana’s Copel’s distribution unit needs 603 million reais.

Cemig said it would not comment on the issue. CEEE and Copel did not respond to requests for comment.

The Aneel report still must be reviewed by its board of directors.

Celsc, another power utility named in the report as failing to meet the targets, called the analysis “preliminary” and that the company understood that obligations to make financial contributions only started from 2017.

The report also found that a unit of CPFL Energia failed to meet standards set for the duration and frequency of service interruptions.

Marco Antonio Villela, president of CPFL Sul Paulista, told Reuters that 2016 was “a point off the curve” and that the firm had more than doubled its investments to meet the target this year.

Reporting by Luciano Costa; Writing by Jake Spring; Editing by Phil Berlowitz

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