UPDATE 3-Brazilian government is considering emergency coronavirus loans for the electricity sector

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(Add auction postponements, comments from Eletrobras CEO)

SAO PAULO, March 30 (Reuters) – The Brazilian government is considering an emergency loan program for energy distributors facing declining energy consumption and loss of income due to the coronavirus outbreak an industrial group told Reuters on Monday.

Marcos Madureira, president of the Brazilian association of energy distributors Abradee, said the package being negotiated by companies and the government could involve loans from the public development bank BNDES or a pool of banks, but that the value of the loans and other details were not yet settled.

In addition, the Brazilian Ministry of Mines and Energy is indefinitely postponing the auction projects for transmission and power generation assets scheduled for this year due to the coronavirus, he said in the Official Journal. .

The coronavirus epidemic will also delay the privatization of the state-owned Eletrobras, its chief executive said on Monday.

The potential loan program under discussion would look like a similar measure in 2014 and 2015 that offered around 22 billion reais ($ 4.2 billion) in loans to the sector as Brazil entered its worst recession on record, said Madureira.

Public and private banks, including BNDES, Caixa Economica Federal, Itau Unibanco and Banco Bradesco, participated in these loans.

Three sources involved in the talks said on condition of anonymity that the Ministry of Mines and Energy and energy regulator Aneel were investigating the matter.

Aneel declined to comment. The Ministry of Mines and Energy and BNDES did not immediately respond to requests for comment.

Energy distributors fear that the reduction in electricity consumption due to the epidemic could lead to severe revenue losses.

The coronavirus has led to widespread shutdowns of non-essential businesses in Brazil, while citizens are urged to stay at home. This results in lost income for many hourly and informal workers in Brazil, who may be unable to pay their electricity bills.

The government sees a loan program as a way to avoid a potential chain of defaults in the industry, one of the sources said.

In a conference call with investors on the company’s latest earnings, Eletrobras CEO Wilson Ferreira Jr. said the privatization would be delayed, without giving further details on the expected timeline.

The main investors in the energy distribution sector in Brazil are the Italian Enel, the Spanish Iberdrola via its subsidiary Neoenergia and the Chinese State Grid via CPFL Energia as well as the local players Energisa e Equatorial Energia. ($ 1 = 5.1866 reais) (Reporting by Luciano Costa; Writing by Jake Spring and Jamie McGeever; Editing by Lisa Shumaker and Peter Cooney)

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