Brazil’s electricity distributors say a $ 2.9 billion loan will not be enough to offset losses from COVID-19
SAO PAULO (Reuters) – A Brazilian government-designed loan of real 16 billion ($ 2.93 billion) to help power distribution companies deal with the coronavirus crisis is not enough to cover all of the losses caused by the pandemic an industry association announced on Tuesday.
Several banks under the direction of the Brazilian development bank BNDES are involved in the so-called “Conta Covid” operation to increase the liquidity of utility companies and, according to Marcos Madureira, head of the Brazilian Association of Electrical Power Distribution Abradee, only solve immediate financial problems.
He noted that the lower energy consumption triggered by social distancing measures to contain the outbreak will have a negative impact on electricity distribution companies’ revenues.
“This results in a reduction in Ebitda (earnings before interest, taxes, depreciation and amortization) for companies as they generate lower than expected sales for the same service while not reducing costs,” said Madureira.
Other medium-term effects are also to be expected, such as higher losses on irregular connections and late payments, which could hardly be remedied even after the end of the pandemic, he added.
Electricity distribution companies have asked local regulator Aneel to analyze the economic and financial record of their concessions, potentially allowing them to raise tariffs if it is decided that operations will be structurally affected.
Reporting by Luciano Costa; Writing by Gabriela Mello; Editing by David Gregorio