Brazilian integrated electric utility, Companhia Energetica de Minas Gerais’ (CIG - Free Report) (also known as CEMIG) affiliated company, Renova Energia S.A. (Renova) recently signed an agreement to sell its rights and obligations related to Umburanas wind farm complex project to Engie Brasil Energia S.A. The completion of the agreement is subject to certain regulatory and other approvals.
Umburanas wind farm complex is located in the Bahia State of Brazil. The aforementioned project has a capacity to generate 605 MW of wind power.
In the last three months, the American Depository Receipts of the stock have yielded 17.6% return, outperforming 3% gain recorded by the industry it belongs to.
Details on the Agreement
As revealed, the wind power project’s deal have been valued at R$15 million. France-based Energia’s subsidiary Engie Brasil Energias Complementares Participações Ltda will receive the rights related to the Umburanas I Project, with wind power generation capacity of 355.5 MW; the Umburanas II Project, with 108.9 MW generation capacity; and the Umburanas III Project. The third project refers to Renova’s remaining wind power generation capacity in the Umburanas wind farm complex.
The transaction will work in the interest of Renova, as it improves its liquidity position in the near term while reducing its capital expenditure requirements in the medium term. Renova was supposed to invest in the Umburanas II Project in the next 18 months. In addition to these positives, the transaction will reduce Renova’s trading exposure. We believe these favorable aspects will eventually prove beneficial for CEMIG.
In July 2017, Renova informed the market about Brookfield Asset Management Inc’s offer to buy out the former. Currently, talks are going on between Renova and Brookfield Asset Management’s local unit, Brookfield Energia Renovavel SA. The above-mentioned deal will in no way interfere with these negotiations.
Comp En De Mn Cemig ADS Price and Consensus
Zacks & Key Picks
CEMIG currently has a $3.5 billion market capitalization and carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are Atlantica Yield PLC (ABY - Free Report) , Fortis Inc. (FTS - Free Report) and Algonquin Power & Utilities Corporation (AQN - Free Report) . While Atlantica Yield and Fortis Inc. sport a Zacks Rank #1 (Strong Buy), Algonquin Power & Utilities carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Atlantica Yield’s earnings expectations for 2017 and 2018 have improved over the past 60 days. Also, the company reported better-than-expected results in second-quarter 2017 with a positive earnings surprise of 118.2%.
Fortis pulled off an average positive earnings surprise of 10.99% for the last four quarters. Also, earnings estimates for the stock improved for 2017 and 2018 in the last 60 days.
Algonquin Power & Utilities Corporation performed well in three out of last four quarters, with an average positive earnings surprise of 34.22%. Earnings estimates for 2017 and 2018 have improved in the last 60 days.
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