Cia. Energetica de Minas Gerais, Brazil’s second-biggest electric utility by market value, slumped after a court said it would delay indefinitely ruling on the company’s request to renew a hydroelectric dam license.
Non-voting shares of Cemig, as the Belo Horizonte, Brazil-based company is known, declined 6.4 percent to 15.858 reais today in Sao Paulo, the biggest drop since March 2013. The Ibovespa stock index fell 1 percent.
Cemig had asked the court to reverse a decision by Brazil’s Energy Ministry to not renew a license to operate the Jaguara dam under rules existing prior to September 2012, before President Dilma Rousseff imposed changes that were less favorable to utilities. Deliberations were suspended today with two judges on the five-judge panel in favor of Cemig’s request, and two against it. The remaining judge asked for more time to consider the case.
“Cemig has always stated it had a strong case on courts but saw two judges voting against it,” Marcelo Britto and Kaique Vasconcellos, analysts at Citigroup Inc., wrote in a note “However, nothing is yet decided and no one can affirm at this point if Cemig will win or lose.”
Jaguara is Cemig’s fourth-biggest hydroelectric plant by installed power.
Rousseff announced more than a year ago a plan to reduce electricity costs for consumers and businesses by demanding that generation and transmission companies agree to cut rates before renewal of hydroelectric and power-line concessions.