Brazil-based integrated electric utility, Companhia Energetica de Minas Gerais (CIG), also known as CEMIG, recently announced an early redemption of all the one- year commercial promissory notes of its fourth issue.
The early redemption will take place on March 21, 2012, instead of December 22, 2012, as decided earlier. The company, in December 2011, had issued eight R$12.5 million worth of notes, amounting to R$100 million. The notes carried interest rates corresponding to 106% of the DI Rate, calculated and published by Cetip S.A. – the Organized Over-the-Counter Assets and Derivatives Market.
In addition to the early redemption announcement, CEMIG’s wholly-owned subsidiary, Cemig Geracao E Transmissao S.A. (Cemig GT) recently announced the initiation of public distribution of 1.35 million unsecured book-entry debentures amounting to R$1.350 billion. These instruments are issued at a nominal value of R$1000 and are not convertible into shares.
The entire series of units will be issued in three installments with the first one having 480,000 debentures, the second includes 200,000 debentures and the third comprises 670,000 debentures.
Cemig is one of the largest integrated electric utilities in Brazil, which gives tough competition to its peers like Companhia Paranaense de Energia (ELP). We believe CEMIG is comfortably positioned to benefit from the rising demand for electricity in Brazil. 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.
Growth momentum for the company, however, gets restricted due to higher operating and financial expenses. 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 current Zacks Consensus earnings estimate for the fiscal years 2011 and 2012 are $1.76 and $1.96 per share. These represent a 13.98% year-over-year decline and 11.15% growth, respectively.
We currently maintain a Neutral recommendation on the company.
CEMIG SA -ADR (CIG): Free Stock Analysis Report
COPEL-ADR PR B (ELP): Free Stock Analysis Report
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