Brazil Electricity-Distribution Contracts to Be Based on Service

President Dilma Rousseff’s administration will try to steer electricity-distribution contracts to companies with good customer-service records, a government official involved discussions about the contracts said.

A review of the contracts is not intended to cut rates, the official said. Companies with poor service records or too much debt may not have their contracts renewed, said the official, who cannot be named because the discussions are not public.

Energy distribution units from Centrais Eletricas Brasileiras SA (ELET3), Cia Energetica de Minas Gerais, CPFL Energia SA (CPFE3) and Cia Paranaense de Energia are among the group of utilities that have contracts expiring from 2015 to 2017.

Eletrobras, as the state-controlled energy company is known, has a 15.27 debt to Ebidta ratio, the highest among the publicly traded utilities that have contracts expiring, according to data compiled by Bloomberg.

Eletrobras distribution units are not among the top companies in terms of service, according to the website of the country’s electricity regulator.

The company said on Oct. 28 that the restructuring plan for its distribution units is already under evaluation from the country’s development bank.

To contact the reporter on this story: Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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