Cemig-GT-TAESA Contract
Brazil’s integrated electric utility, Companhia Energetica de Minas Gerais(CIG), also known as CEMIG and its two affiliated companies, Cemig Geração e Transmissão S.A. (Cemig GT) and Transmissora Alianca de Energia Electrica S.A., or TAESA, entered into a contract involving transfer of shareholding in some transmission companies.
As per the terms of the contract, TAESA will be paying roughly R$1.73 billion in exchange for the minority holding of six transmission companies held by Cemig and Cemig GT. Of the total disbursement, approximately R$1.67 billion will be paid to Cemig while the rest R$61.1 million to Cemig GT.
The shareholding restructuring will enable Cemig to consolidate its transmission holding under one roof and allow optimal utilization of the assets.
Cemig, among the largest integrated electric utilities in Brazil, gives tough competition to its peers like Companhia Paranaense de Energia (ELP). We believe CEMIG is comfortably positioned to benefit from the rising demand of 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.
In its recently announced first quarter 2012 results, Cemig reported a 20% year-over-year increase in net earnings. Top line in the quarter jumped 15%, driven primarily by a 2.6% growth in electricity sold.
The current Zacks Consensus earnings estimate for the fiscal years 2012 and 2013 are $1.65 and $1.75 per share. These represent a 13.05% year-over-year decline and growth of 6.05%, respectively.
The stock currently has a Zacks #3 Rank translating into a short-term (1-3 months) Hold rating.
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