(CIG) Companhia Energetica de Minas Gerais Guides for 2011-2015

Companhia Energetica de Minas Gerais (CIG), also known as CEMIG, recently announced its financial guidance for the period 2011-2015.

The company’s distribution unit, CEMIG D is expected to post healthy results in the years ahead. Energy distribution in the retail market (captive market) is expected to escalate from an estimated 23.2-24.3 TWh range in 2011 to 25.9-28.5 TWh range in 2015; while its total energy distribution (Captive+Free) is likely to rise from 42.7-44.8 TWh range expected in 2011 to 48.8-53.8 TWh in 2015.

It is anticipated that CEMIG GT, the company’s energy generation unit, would generate over 40.1 TWh of energy in the fiscal year 2011. This includes over 4.2 TWh secured through participation in the secondary energy market.

Generation in 2015 is estimated to be roughly 36.1 TWh after reaching 38.0 TWh in 2014. Moreover, the company expects the existing contracts at CEMIG GT to be renewed at higher prices staring 2014.

EBITDA for the full company is very likely to be on a rising trend in the years ahead with a slight downward movement in 2013. For 2011, EBITDA is expected to be within R$5.0-5.6 billion range and reach R$5.3-6.1 billion range by 2015.

Presumably, the economic recovery in Brazil will prove to be extremely efficacious in promoting growth for the company. Demand for electricity in the country, which is already on the rise and would probably get a boost as the country hosts two major sporting events in the coming years.

CEMIG, one of the largest integrated electric utilities in Brazil, has more than 6,896 megawatts of installed generation capacity, deriving approximately 97% from hydroelectric power.  It faces stiff competition from peer companies like Companhia Paranaense de Energia (ELP).

We currently maintain a Neutral recommendation on the stock.

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