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Negotiations to settle the huge energy distributors debt in Brazil are underway, with the spot energy bill already reaching over $1.26bn since the start of the year, according to reports.

Whilst payments for August and July have been postponed, a decision is reportedly expected before the end of October.

The deficits are due to the difference between the physical guarantee of hydroelectric units and the volume of energy generated, with the gap standing at over 20 per cent this year due to drought season, added to the costs of thermoelectric generation, according to a report by M-Brain Insight.

The report, which cited market sources close to the process, said both the government and energy operators are willing to solve the issue through the re-negotiation of the hydrologic risk calculation.