Brazilian power producer Eneva has filed for bankruptcy protection in a Rio de Janeiro court.
The firm, which is 43 per cent owned by Germany's E.On, says that legal protection would enable it to continue its operations and modify its capital structure. It filed the petition after failing to refinance part of its $900 million debt.
According to E.On, Eneva suffers from a lack of liquidity caused by "a combination of operational issues, a stressed market environment and high levels of debt and interest". It said that a stabilisation plan drawn up earlier this year did not have the support of all of Eneva's creditors.
E.On says it expects the court to make a decision on the petition by late December. It will replace Eneva CEO Fabio Bicudo, while three other Eneva board members have stepped down.
Eneva operates 2400 MW of generating capacity in Brazil, where a prolonged drought has caused reserve margins to tighten and spot electricity prices to soar.
The firm has been forced to purchase electricity on the spot market to meet contractual obligations because of delays in building and licensing its coal and natural gas fired power plants.
E.On took control of Eneva, formerly known as MPX Energia, in 2013 after the parent company controlled by tycoon Eike Batista collapsed.
Batista has retained a 20 per cent stake in Eneva.
Sian Crampsie
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