Brazil’s integrated electric utility, Companhia Energetica de Minas Gerais (CIG), also known as Cemig’s distribution arm, Cemig Distribuicao S.A., or Cemig D, recently concluded the offering of roughly R$2.16 billion worth of unsecured debentures.
The issue was approved by the company’s board of directors on Jan 17, 2013. The whole issue was completed on three series. The first one comprised R$0.41 million debentures, the second, R$1.1 million debentures and the third, R$0.65 million debentures. The debentures issued had a nominal face value of R$1000 and cannot be converted into shares.
Cemig D covers approximately 97% of the Brazilian State of Minas Gerais and has four electricity distribution concessions in Minas Gerais.
We find the long-term growth prospects for Brazilian electricity utilities very bright. Cemig ranks fifth among the electricity generators in Brazil and derives roughly 97% of electricity from hydroelectric sources. The company is in a constant pursuit to attain the position to benefit from the expected growth in electricity demand in Brazil which is gearing up to host two major sporting events in the coming years.
The Brazilian government, in a bid to improvise the electricity industry through its Second Accelerated Growth Program (PAC 2), has allocated approximately R$1.1 trillion. In Cemig’s area of operation, according to the national Energy Research Institute, EPE, the average consumption growth is expected to be 4.5% from 2011 to 2021.
Cemig currently bears a Zacks Rank #3 (Hold). Other companies to watch out for in the industry are Brookfield Infrastructure Partners L.P. (BIP), Otter Tail Corporation (OTTR) and Pike Electric Corporation (PIKE), each with a Zacks Rank #1 (Strong Buy).
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