Brazil BNDES in $1 bln debt deal with power firms

SAO PAULO, Brazil -- - Brazil's government- run BNDES National Development Bank recently announced a 3 billion reais ($1 billion) proposal to renegotiate the short-term debts of ailing power distributors.

The head of BNDES' energy department, Nelson Siffert Filho, said the bank would buy 8-year debentures that power distributors should issue under the deal. The notes, which will replace debt maturing in up to one year's time, will be convertible into stocks of the crisis-hit companies.

But to be able to have access to the BNDES scheme, the utilities will have to convince private creditors to extend at least half of their short-term debt from one to 3 years, Siffert Filho said.

Companies that have missed debt payments with the BNDES should not benefit from the package, BNDES vice-president Darc Costa said in the capital, Brasilia.

Companies have long campaigned for a big bailout deal like last year's 8 billion reais loan from the government that compensated them for mandatory power rationing in 2001-2002, but the government has ruled out any outright rescue.

Power sector stocks rose after the announcement, but analysts said the BNDES proposal, although positive, was not a stock booster.

"This is good for the sector as it helps liquidity and reduces the risk of default, but it should not have a serious impact on stock prices as it does not affect company results," said Oswaldo Telles, an analyst with Bradesco brokerage.

Brazil's electric power sector is in crisis as demand is low following the rationing, while dollar debts were inflated by last year's 35 percent depreciation of the local currency against the U.S. dollar.

As revenues fell, a range of companies have defaulted on some debts, while others are renegotiating.

The National Monetary Council has approved a long-awaited credit worth 1.9 billion reais to compensate distributors for foreign exchange-linked losses stemming from the purchase of dollar-priced power from the Itaipu plant last year. As electricity prices are government controlled, distributors were unable to pass on higher costs to consumers.