Brazil power distributors call on government to shore up sector in pandemic

SAO PAULO, April 3 (Reuters) - Brazilian power distributors have asked the government for financial support as falling demand for electricity during the coronavirus pandemic undermines their operations and weakens their balance sheets.

In a webinar on Friday, the chief executives of some of Brazil's largest distributors discussed a potential support package that could involve emergency loans, including from the national development bank BNDES, in addition to the use of Treasury financing and industry funds to support the companies during the crisis.

The electricity distribution sector was hit hard by the public health crisis, which may put Brazil into a recession, according to some analysts' estimates.

This week, some companies have claimed force majeure on electricity contracts after a sharp reduction in demand in the wake of isolation measures adopted to combat the spread of the coronavirus.

The restrictions have hurt businesses from shopping mall operators to car makers, some of whom announced plant closures for as long as four weeks.

Luiz Barroso, president of consultancy PSR, estimated that a loss of revenue of 20% for power distributors and potential defaults from energy users could represent losses of 15 billion reais ($2.82 billion) for the sector.

The management of ParanĂ¡ utility Copel calculates up to 17 billion reais would be needed by the sector to survive the pandemic.

Talks with the government have involved taking out loans from the BNDES, said Cemig's president Reynaldo Passanezi.

Yet other sources of funding may be needed.

"In situations like this, the state must act," said Energisa's chief executive, Ricardo Botelho.

For example, Botelho defended the government for considering allowing power distributors to access Treasury funding to guarantee that electricity companies stay afloat.

($1 = 5.3109 reais) (Reporting by Luciano Costa and Ana Mano; editing by Grant McCool)

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