PETROBRAS: Company Reaches Debt Deal With Eletrobras

(RTTNews) - The Brazilian state-owned oil company Petrobras reached an agreement with the Eletrobras regarding part of the debts arising from the supply of oil and gas for power generation in northern Brazil.

"The contractual instruments relating to the transaction will be signed today by the parties. Material facts regarding the matter will be timely disclosed to the market," Petrobras said in a statement.

Petrobras supplies fuel oil, natural gas, and other products to companies that operate in the city of Manaus, in the northern state of Amazonas, and in the isolated electricity system in the northern region of Brazil, such as thermoelectric power plants controlled by Eletrobras, state-owned natural gas distribution companies and independent electricity producers.

The isolated electricity system provides the public service of electricity distribution in the northern region of Brazil, as the Brazilian National Interconnected Power Grid has not yet met the local demand for electricity.

The total cost of power generation to Manaus and the isolated electricity system includes the costs to products supplied by Petrobras. Local consumers partially cover these costs, while the most substantial portion of the funds for the payment for these costs comes from the Fuel Consumption Account (Conta de Consumo de Combustavel - CCC), a component of the Brazilian Energy Development Account (Conta de Desenvolvimento Energatico-CDE). The regulation of CCC and CDE underwent some changes in the last few years. That, along with supervision procedures carried out by the Brazilian National Electricity Agency (Aneel) over these accounts and power plants controlled by Eletrobras, decreased transfers from CCC since 2013, increasing the default rate of those customers to Petrobras. Petrobras intensified negotiations with Eletrobras and entered into debt acknowledgment agreements with subsidiaries of Eletrobras concerning the balance of its receivables as of November 30, 2014.

Eletrobras acknowledged it owed US$ 2.202 billion to Petrobras, of which US$ 1.889 billion were collateralized by payables from the CDE to the CCC. This amount has been adjusted by the Selic interest rate (Brazilian short-term interest rate) on a monthly basis and the first of 120 monthly installments was paid in February 2015.

The deal established the payment of 15% of the amount of renegotiated debt within 36 months and the remaining 85% to be paid in 84 installments beginning in January 2018.