Recent announcements by the 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 have been badly hit by the pandemic. With these measures, utilities are expected to successfully maintain their liquidity, which might provide a buffer for them in the uncertain market conditions, according to GlobalData, a data and analytics company.
Somik Das, power analyst at GlobalData, said, "Around US$0.35 million is authorized by the ANEEL for disbursement to distribution utilities and free-market participants as a future relief measure. This will allow utilities to mitigate losses because of 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 and privatization of Eletrobras — which was already facing delays — has been pushed back further. Auctions of generation, as well as transmission projects scheduled in May, have also been postponed. Furthermore, utilities are facing liquidity issues because their receivables have been delayed or deferred and revenues have declined because of reduced demand. Amid the crisis, to maintain cashflows, tackle supply chain disruptions, handle repairs and replacement of components, utilities need to have proper liquidity.
"To provide liquidity for distribution companies to deal with the pandemic, the government is considering postponing firms' payment of federal taxes for two to three months. It is expected that 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 revival of investments in the electricity sector,” Das added.