Zacks_Analysts' Blog : CEMIG to Acquire Stake in Belo Monte - Analyst Blog

Companhia Energetica de Minas Gerais (CIG), also known as CEMIG, recently announced to have entered into an agreement to acquire equity interest in Belo Monte Hydroelectric Plant. The proposed dam on the Xingu River, in the state of Para, Brazil, has a planned installed capacity of 11,233 MW. Upon completion, Belo Monte will be the second-largest hydroelectric dam complex in Brazil and the third-largest in installed capacity in the world.

Cemig via its affiliate company Amazônia Energia Participações S.A. (Amazônia Energia), will acquire in total 9.77% of share capital in Norte Energia S.A. from the latter’s six major equity holders. Brazil-based Norte Energia is a corporation holding concession for construction and commercial operation of the Belo Monte plant.                                            

Amazônia Energia is a special-purpose company formed by Cemig Geração e Transmissão S.A. (Cemig GT), a subsidiary of Cemig and Light S.A. The former holds roughly 49% of the voting stock and 74.5% of the total stock in Amazônia Energia, while the latter has about 51% of the voting stock and 25.5% of the total stock.

As per the Share Purchase agreement,Amazônia Energia will acquire roughly 2.51% equity interest of Norte Energia from Construtora Queiroz Galvão S.A.; 2.51% from Construtora OAS Ltda.; 1.25% from Contern Construções e Comércio Ltda.; 1.25% from Cetenco Engenharia S.A.; 1.25% from Galvão Engenharia S.A.; and roughly 1% from J. Malucelli Construtora de Obras S.A.

In addition, Amazônia Energia will pay an aggregate amount of approximately R$118.7 million for the acquisition. Subsequent to completion of the transaction, Amazônia Energia will become a shareholder of Norte Energia in place of the six vendors; approval for the same has already been received from Norte shareholders.

With a present 6,955MW of generation capacity, Cemig’s total capacity is expected to reach 8,205MW after the addition of Belo Monte (818 MW of incremental generation capacity), Santo Antonio (315MW), and Others (147MW).

The current Zacks Consensus earnings estimate for the fiscal years 2011 and 2012 are $1.66 and $2.10 per share. These represent a 19.02% year-over-year decline and 26.51% growth, respectively.

Cemig is one of the largest integrated electric utilities in Brazil, which gives tough competition to peers like Companhia Paranaense de Energia (ELP).