Recently, Companhia Energetica de Minas Gerais (CIG), also known as CEMIG, signed an agreement with Petróleo Brasileiro S.A (Petrobras) for the purchase of 49% interest in Brasil PCH S.A. The deal comes on the heels of the completion of an important acquisition in Mar 2013.
CEMIG’s subsidiary, Cemig Geração e Transmissão (CEMIG GT), will conduct the stock purchase. The transaction value has been set at R$650 million, with Jan 1, 2013 as the base date. The closure of the deal, at present, is subject to closing conditions including regulatory approvals.
Brasil PCH is a well-renowned power producer in Brazil and controls 13 Small Hydro Plants. The company works independently and primarily uses renewable energy resources. Power generated is mainly sold to Eletrobras. Total installed capacity is estimated at 291 MW, while assured generation is around 194 MW.
CEMIG has been investing in projects and targeting acquisitions to attain its expansionary goals. According to management’s long-term plan, power generation is expected to increase from 30.4 terawatts-hours (TWh) in 2005 to 239.7 TWh in 2035.
In Mar 2013, CEMIG purchased an additional stake in Brazil’s energy consortium, Capim Branco Energia Consortium. The stake purchase increased Cemig’s interest in Capim Branco from its previous 21.1% stake.
CEMIG is one of the largest integrated electric utilities in Brazil with approximately 97% of the company’s installed generation capacity being hydroelectric power. The Zacks Consensus Estimate for 2013 and 2014 is pegged at $1.41 per ADR and $1.46 per ADR, respectively. These represent a year-over-year decline of 42.5% for 2013 and growth of 3.8% for 2014.
CEMIG currently has a Zacks Rank #3 (Hold). Other stocks in the industry that are worth considering are Companhia Paranaense de Energia (ELP), CPFL Energia S.A. (CPL) and ALLETE, Inc. (ALE). While Companhia and CPFL carry a Zacks Rank #1 (Strong Buy), ALLETE carries a Zacks Rank #2 (Buy).
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