Brazil’s power sector is expected to press the pause button to deal with COVID-19 pandemic, says GlobalData

Recent announcements by Brazilian Energy Ministry and power regulator National Electric Energy Agency (ANEEL) such as the provision of free electricity and the allocation of funds to the power sector are expected to provide necessary relief to distribution utilities and low-income electricity consumers who are badly hit by the pandemic. With these measures, the utilities are expected to successfully maintain their liquidity, which might provide a buffer for them in the uncertain market conditions, says GlobalData, a leading data and analytics company.

Somik Das, Power Analyst at GlobalData, comments: “Around $0.35m is authorized by ANEEL for disbursement to distribution utilities and free-market participants as a future relief measure. This will allow utilities to mitigate losses due to reduced electricity consumption and maintain power purchase obligations.”

COVID-19 had a severe impact on the electricity sector in Brazil. Electricity demand declined in the country, privatization of Eletrobras – which was already facing delays – is pushed further, and auctions of generation, as well as transmission projects scheduled in May, were also postponed. Furthermore, utilities are facing liquidity issues as their receivables are delayed or deferred and revenues have declined due to reduced demand. Amid the crisis, to maintain cashflows, tackle supply chain disruptions, handle repairs and replacement of components, utilities need to have proper liquidity.

Das continues: “To provide liquidity for distribution companies to deal with the pandemic, the government is considering postponing firms’ payment of federal taxes for 2-3 months. It is expected that the post-pandemic, the government will look to attract investments in the power sector to revive the sector from a slump. Auctions of renewables and transmission projects can be used for the revival of investments in the electricity sector.”

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