Tractebel 4th-Quarter Profit Drops as Dry Weather Boosts Power Prices

SAO PAULO--Tractebel Energia (TBLE3.BR), the Brazilian subsidiary of GDF Suez (GSZ.FR), reported Thursday a drop in fourth-quarter net profit due in part to higher electricity prices as more thermoelectric plants were needed in Brazil to make up for falling hydroelectic generation.

Net revenue climbed 16% to 1.27 billion Brazilian reais ($644 million), but profit dropped 3.6% to BRL433 million, Tractebel said in a regulatory filing.

Brazil's rainy season, which usually starts in the fourth quarter, started out drier than usual, leading to a drop in reservoir levels at hydroelectric dams. Because the country relies overwhelmingly on hydropower--about 85% of electricity is generated via dams--the lower reservoir levels required the firing of thermoelectric plants, which produce energy at much higher costs.

Tractebel is not much different, with about 85% of its installed capacity coming from hydoelectric sources. In order to supply all its customers with power, Tractebel had to buy more expensive energy from other generators on the open market, where prices were rising due to the abnormally dry weather.

Tractebel ended up paying a net BRL11.1 million for the energy, whereas in the year-earlier quarter it gained a net BRL47.4 million from selling energy, according to the filing.

For the year, however, Tractebel profited from buying and selling energy on the market, with a net gain of BRL244.8 million, the company said.

In the fourth quarter, earnings before interest, taxes, depreciation and amortization, or Ebitda, slipped 0.6% to BRL762.1 million, representing a 9.8 percentage point drop in Ebitda margins.

Write to Paulo Winterstein at [e-mail]

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