Recently, Companhia Energetica de Minas Gerais, or CEMIG (CIG) posted results for the fourth quarter and year 2009. Net income for the quarter was R$434 million (US$248 million), up from R$246 million (US$107.4 million) in the same quarter of 2008 based on a 22.0% increase in net revenues during the quarter.

EPS was R$0.70 or 40 cents compared to R$0.57 or 25 cents in the same quarter of 2008. Reported EPADR also surpassed the Zacks Consensus Estimate of 37 cents.

Net revenues reached R$3,370 million (US$1,925.7 million), up from R$2,754 million (US$1,202.6 million) in the fourth quarter of 2008. The increase was due to the 7.0 % rise in total sales volume.

Operating expenses during the quarter increased 23.0% year over year, mainly due to higher personnel expenses and the increase in cost of electricity bought for resale. EBITDA increased from R$947 million (US$413.5 million) in the year-ago quarter to R$1,104 million (US$631.0 million) in the reported quarter.

During 2009, net income was R$1,861 million (US$925.9 million), almost flat compared to the year-ago level of R$1,887 million (US$1,025.5 million). EPS was R$3.00 or US$1.49, down from R$3.81 or US$2.07 in 2008. 2009 EPADR was slightly below the Zacks Consensus Estimate of US$1.55.

Net revenues were R$11,705 million (US$5,823.4 million), up from R$10,890 million (US$5,918.5 million) in the previous year.

Sales volume to final consumers decreased 6.37% year over year. The main reason for the decrease was lower industry consumption by 15% compared to 2008, based on migration of captive consumers to the free market, and also a reduction in demand from industrial companies, specifically in metals and mining sectors. However, total sales volume increased 2.0% year over year.

Operating expenses increased 12.0% year over year, while EBITDA almost remained flat at R$4,039 million (US$2,009.5 million) in 2009 compared to R$4,099 million (US$2,227.7 million) in the previous year.

At the end of the fourth quarter of 2009, the company reported a net debt of R$6,869 million (US$2,961 million), up from R$5,059 at the end of 2008 and also up from R$5,300 million at the end of the previous quarter.

The favorable outlook of CEMIG reflects the positive potential for electricity demand in Brazil, which is expected to rise by 4.5% on average in the coming years. We maintain our Neutral recommendation on CEMIG.

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