CEMIG Issues Promissory Notes - Analyst Blog

Brazil-based integrated electric utility, Companhia Energetica de Minas Gerais(CIG), known as CEMIG, announced the third issuance of its commercial promissory notes amounting to R$350 million.

The public distribution of the notes will involve issuance of thirty five R$10 million worth notes maturing on December 18, 2011. Interest will be paid at rates corresponding to 105.5% of the DI Over Rate, calculated and published by Cetip S.A. – the Organized Over-the-Counter Assets and Derivatives Market.

CEMIG intends to use the funds raised to strengthen its cash position following its heavy investments made in the fiscal year 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 comfortably 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.

The company has a strong balance sheet, efficient operations, a good market share position, and attractive relative valuation compared with other international electric utilities. Cash and cash equivalents at the end of the third quarter increased 11.3% sequentially to R$4,178 million (US$2,443.3 million).

However, growth momentum in the quarter was affected by higher operating and financial expenses as net results dipped 2.4% year over year. Moreover, rising debt levels, persistent interference from the state government, competitive pressures in the Brazilian market and high dependence on natural water resources tend to be problematic. The company faces stiff competition from Companhia Paranaense de Energia (ELP).

We currently maintain a Neutral recommendation on the stock.

 
CEMIG SA -ADR (CIG): Free Stock Analysis Report
 
COPEL-ADR PR B (ELP): Free Stock Analysis Report
 
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