Brazil's CEMIG Rebounds

Joel Anderson  |

The Brazilian Companhia Energetica Minas Gerais (CIG), the state-controlled electricity provider better known as CEMIG, posted strong gains on Wednesday after reporting that its plans to buy a 9.77 percent stake in Norte Energia will not affect the company's dividends.  The company's stock had taken a hit on Tuesday amid rumors of another acquisition, but assurances that dividend payouts would not be affected bolstered market support.


News of the Norte Energia deal comes right on the heels of the announcement that Cemig intends to buy a 21 percent stake in EDP Energias de Portugal (EDPFY).  New Monday of the purchase drove after-market trading on CEMIG down.  It spilled into Tuesday's trading and CEMIG ended the day posting a 4.49 percent loss in their stock's value.  “This potential acquisition would be negative for Cemig as we do not believe that the purchase of international assets, mostly in Europe, makes much sense for the company,” Bradesco Corretora analysts Vladimir Pinto and Marcelo Sa wrote. “Moreover, Cemig’s current balance sheet is not strong enough to support such a sizable acquisition.”

However, they followed this up with news of the acquisition of a stake in Norte Energia, which has plans to begin construction on the Bela Monte Dam in the Amazon in time to have it operational by 2015, that once again prompted after-market trading, this time in the positive.  CEMIG pledged to keep dividends consistent despite the purchase in a statement Tuesday, which soothed investor's concerns.  “The pledge to keep paying the same dividends as before was positive,” Rosangela Ribeiro, an analyst at SLW Corretora brokerage, said in a telephone interview from Sao Paulo. “Investors were worried about this issue after the deal was announced.”  CEMIG stock opened up 3.5 percent on Wednesday and continued to push gain towards 5 percent as the day wore on.  Stock in Brazilian utilities CPFL Energia S.A. (CPL) and Companhia Paranaense de Energia (ELP) also showed strong gains on the day, moving up over 2.25 percent and 2.75 percent respectively.


Utility Genon Energy (GEN) also saw major gains Wednesday, with their stock value increasing nearly 5 percent in early trading.  American Electric Power Company, Inc. (AEP) released their Q3 earnings reports to show adjusted net income of $1.17 per share, ahead of estimates of $1.13 per share.  This came along with news that Nicholas A. Akins will replace CEO Michael G. Morris when he retires in November.  After-market trading drove the stock up 2.2 percent to 39.50 only to see an early morning sell-off correct the spike and return gains to a more modest third of a percent on the day.  The AES Corporation (AES) saw a major rebound in after-market trading after losing 3.65 percent in trading on Tuesday, jumping 3 percent after-market and holding a 2 percent gain over the course of the day.  NextEra Energy (NEE) also posted gains, jumping over 1.5 percent on the day.

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