Light Leads Utilit Gain as Brazil Allays Grid Concern

Light SA led a rally by Brazilian electricity companies after the government said a blackout this week was an isolated incident and measures are being devised to compensate distributors for record high spot prices.

Shares in the Rio de Janeiro state generator and distributor gained 4.4 percent to 18.41 reais at the close of trading in Sao Paulo, the most since Oct. 18. It was the best performer on the BM&FBovespa Electric Power Index, which climbed 1.3 percent. The benchmark Ibovespa index gained 2.4 percent.

The industry index rebounded from the lowest level since 2010 after Deputy Energy Minister Marcio Zimmermann said that while 6 million people were affected by supply cuts this week as a heat wave pushes up demand, Brazil has more than enough supply and no rationing measures are being discussed. The chief power regulator said he’s working on relief for distributors as low dam levels push up spot prices.

“Utilities suffered a lot in the past days on concern power outages and energy rationing this year in Brazil could reduce revenue,” Henrique Kleine, head analyst at Sao Paulo-based brokerage Magliano SA, said by telephone. “The government now will make every effort to ensure people that those problems won’t happen and that it is paying attention to the utilities’ situation.”

Brazil has increased power capacity since 2001 when it last had to ration supply and now has enough to face an even longer and harsher drought than the one draining reservoirs and sending spot power prices to record highs, Zimmermann said in an interview in Brasilia yesterday.

World Cup

The grid will be able to cope with hosting the soccer World Cup as temperatures and consumption diminish by the time the tournament begins in less than five months, he said.

Electricity regulator Agencia Nacional de Energia Eletrica is calculating how higher power prices will feed through to rates that distributors charge clients, Romeu Rufino, the agency’s director, said yesterday in an interview from Brasilia.

“We need to have a solution for the distribution utilities by the end of the month because they need to make payments for spot market energy by March,” he said. “They are in a delicate situation.”

Before it's here, it's on the Bloomberg Terminal.