CEMIG Announces Special Dividend - Analyst Blog

Companhia Energetica de Minas Gerais (CIG), also known as CEMIG, received approval for payment of a special dividend aggregating R$900 million, by its Board of Directors on December 16, 2010.

The special dividend, equivalent to R$1.319408855 per share, will be paid out of the company's Profit Reserve to shareholders with names on the company's Nominal Share Register as on December 16. The dividend payment date is fixed for  December 29, 2010.  

The special dividend declaration follows the company's announcement to pay dividends amounting to R$465.35 million to shareholders on December 21, 2010 as part of the company's dividend disbursement for the year 2009. This was the second installment of $930.7 million dividend payment decided on April 29, 2010.

CEMIG is one of the largest integrated electric utilities in Brazil. It has more than 6,716 megawatts of installed generation capacity, deriving approximately 97% from hydroelectric power. 

We believe CEMIG is favorably positioned to benefit from the rising demand for electricity in Brazil. Its integrated nature of activity (generating and distributing energy) along with its aggressive expansion plan is making its presence felt among the industrial customers both in the south and southeast of Brazil.

However, rising operating expenses (evident from the third quarter results), higher debt levels, persistent interference from the state government, competitive pressures in the Brazilian market and high dependence on natural water resources might restrict the company's performance in the quarters ahead. Further, CEMIG faces stiff competition from Companhia Paranaense de Energia (ELP).

We currently maintain a Neutral recommendation on the stock.