Cemig Rises as Utility Waits for Review Details: Sao Paulo MoverDenyse Godoy
Cia. Energetica de Minas Gerais, Brazil’s third-biggest power utility by market value, rebounded after plunging 14 percent yesterday on concern a rate review next month may lead to lower-than-expected profits.
Shares of Cemig, as the company is also known, rose 1.4 percent to 22.50 reais at the close of trading in Sao Paulo. Trading volume on the stock was 2.3 times the three-month daily average, according to data compiled by Bloomberg. The benchmark Bovespa index slid 0.8 percent.
Cemig is waiting for its regulator to provide a technical explanation of the rate review’s new parameters so it can question them, according to an e-mailed statement from the company yesterday after markets closed. The stock had tumbled as Banco Bradesco SA’s brokerage unit cut its recommendation to the equivalent of hold, citing the rate review.
On March 11, Brazil’s electric-utility regulator, Aneel, lowered a preliminary asset valuation that’s used to gauge the company’s costs and set rates. The lower valuation may reduce earnings before interest, taxes, depreciation and amortization by 247 million reais ($123 million) a year from previous forecasts, according to Banco Bradesco.
The utility’s earnings guidance, published in May 2012, already incorporates the impact of the rate review, Cemig Chief Financial Officer Luiz Fernando Rolla told investors and analysts on a teleconference yesterday.
“We said several times there would be a reduction with Aneel’s methodology,” Rolla said. “We don’t think the result of this rate revision should be surprising for the market.”