May 5, 2020 / 5:25 PM / a month ago

UPDATE 1-Brazil eyes May aid package for power sector -energy minister

(Rewrites throughout to detail potential aid package)

SAO PAULO, May 5 (Reuters) - The Brazilian government is working to present an aid package for struggling companies in the electricity distribution sector by the end of May, Brazilian Mines and Energy Minster Bento Albuquerque said on Tuesday.

In a virtual speech to industry group Abdib, Albuquerque said under the terms of the potential package, electricity companies would be given access to loans from private and state-run banks to ensure their liquidity. They would then pay the loans back through discounts on electricity tariffs.

He did not indicate how large any potential loans would be.

“We’ve begun to work ... with Banco do Brasil SA and other actors in the financial sector, so that we can go about building (a solution),” Albuquerque said, referring to one of Brazil’s state-run banks.

He added, however, that resources were scarce, and the electricity distributors would be competing with companies in other hard-hit sectors of the economy.

Brazilian utilities face surplus energy this year of between 20% and 40% due to the sharp drop in consumption during to the coronavirus pandemic.

Energy distributors say customer default rates have also jumped to 12% from 3% over the last month, Bento said.

Distributors in the nation’s relatively poor north and northeast have been particularly hit, he added.

Companies that operate in the distribution sector in those regions include Equatorial Energia SA, Energisa SA , Neoenergia SA and Enel SpA.

Reporting by Luciano Costa Writing by Gram Slattery and Jamie McGeever; Editing by Bill Berkrot

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