Brazil authorizes loan for generation tab

The Brazilian government has issued a decree authorizing the power clearing chamber (CCEE) to take a loan on behalf of the power distribution companies and its clients to cover the financial effects of the 2020/2021 drought on power distributors.

The sector expected the value of the loan to be between R10bn-R15bn ($1.8bn-$2.7bn), but with the start of the rainy season it may now be less. The loan value has not yet been made public but will be once the loan is contracted.

The loan will be covered by consumers in the regulated market through their energy bill.

This is not the first time Brazilian power distribution companies received loans to help them cover larger-than-expected generation tabs. For previous loans of this kind, the debt was paid off by regulated power consumers over five years.

For power consumers in bilateral contracts, the extra costs due to dispatching more thermal power generation in 2021 were paid as surcharges levied by the CCEE and are not covered in this loan.

Brazilian national power regulatory agency Aneel will now determine how this will be billed to consumers.

By Rebecca Gompertz