Cemig Gains to 3-Month High on Votorantim Contract

Cia. Energetica de Minas Gerais rose to the highest in three months in Sao Paulo after it won a 10.5 billion reais ($6.4 billion), 20-year contract to supply electricity, bolstering the earnings outlook for utilities.

Cemig, as Brazil's biggest combined power producer and distributor is known, gained 3.8 percent to 34.48 reais, the highest since Jan. 9. Before today, the stock had risen 1.9 percent this year, compared with a 2.8 percent gain for the Bovespa.

Belo Horizonte, Brazil-based Cemig said yesterday it signed the contract to supply power to Votorantim Group, Brazil's largest diversified industrial group. It will make available as much as 670 megawatts of power to Votorantim and prices will likely average 138 reais a megawatt hour, UBS AG analyst Pedro Batista wrote in a note to clients.

``We believe that this price is crucial for the sector and could be a strong signal for long term prices,'' Batista wrote.

The price may range as high as 140 reais a megawatt hour, above the analyst's long-term estimate of as much as 125 for electric companies such as Cemig and Cia. Paranaense de Energia, Batista wrote.

Copel, as the electric company controlled by the state of Parana is known, climbed 1.2 percent to 28.20 reais.

To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.

To contact the editor responsible for this story: Chris Nagi at at chrisnagi@bloomberg.net.

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