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Cemig to Increase Stake in Capim

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Brazil’s integrated electric utility, Companhia Energetica de Minas Gerais , also known as CEMIG is all set to increase its stake in Brazil’s energy consortium, Capim Branco Energia Consortium.

The deal signed between Cemig’s wholly-owned subsidiary, Cemig Capim Branco Energia S.A. and Suzano Papel e Celulose S.A. and subsidiaries, one of the largest paper and pulp companies in Brazil, requires Cemig Capim to purchase its share of Suzano’s 17.9% stake in Capim Branco Energia Consortium.

Suzano’s stake in the consortium represents 81MW of installed capacity, at the Amador Aguiar I and II hydroelectric plants. The 17.9% stake sale is valued at approximately R$320 million while Cemig’s share is of about R$82 million.

The stake purchase will increase Cemig’s interest in Capim Branco from its existing 21.1% stake. Cemig now intends to add to its existing stake further in the consortium through purchase of leftover stake, only if other members don’t opt for the same. Other partners in the energy consortium are Vale SA (VALE - Free Report) with a 48.4% stake and Votorantim with a 12.6% stake.

Ranking fifth among the electricity generators in Brazil, Cemig derives approximately 97% of electricity from hydroelectric sources. The company, with its integrated nature of activity (generating and distributing energy) and aggressive expansion plan is making its presence felt among the industrial customers both in the south and southeast of Brazil.
The current Zacks Consensus earnings estimate for years 2012 and 2013 are $2.55 and $1.52 per ADR. These represent year-over-year growth of 34.2% for 2012 and decline of 40.2% for 2013.

Cemig currently bears a Zacks #3 Rank, translating into a short-term Hold rating. On the other hand, the company’s prime competitor Companhia Paranaense de Energia also bears a Zacks #3 (Hold) Rank.

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