Brazil to renew energy contracts by decree-report

SAO PAULO, Jan 29 (BestGrowthStock) – Brazil’s government plans to
renew concessions for electric utilities by presidential decree,
in a bid to reduce regulatory uncertainty that has damped
investments and mergers in the sector, Folha de S.Paulo
newspaper reported on Friday, citing a draft of the proposal.

The decision means the government has abandoned plans to
take back the concessions, which end between 2015 and 2020, and
auction them again, Folha said.

Officials at Brazil’s Aneel utility regulator have argued
that electric utilities face difficulty in raising funds from
banks to invest in transmission lines or secure long-term energy
sales and purchase contracts because of doubts on the concession
renewal, the daily said.

Under the plan, energy generators would have their contracts
renewed, but would have to agree to lower electricity tariffs,
Folha said. The rules for companies in energy transmission and
distribution wouldn’t be changed, the daily said.

A portion of electricity tariffs in Brazil goes directly to
generators to make up for investments in power plants, but since
the majority of those plants were built several years ago,
companies wouldn’t need the funds, Folha said.

The decision to renew the concessions by decree may benefit
particularly three state-run utilities that ran the risk of
having a majority of their assets returned to the federal
government, the daily reported.

An official at the presidential palace had no immediate
comment.

Sao Paulo state-run energy generator Cesp (CESP6.SA: ) has
four power plants with concessions ending in 2015, Folha said,
while Cemig (CMIG4.SA: )(CIG.N: ), the combined utility controlled
by Minas Gerais state, has 19 plants with concessions coming due
in 2020. Parana-state run Copel (CPLE6.SA: )(ELP.N: ) also has the
concession for seven power plants ending in 2019.

Investment Research

(Reporting by Elzio Barreto; Editing by Jon Loades-Carter)

Brazil to renew energy contracts by decree-report