On Apr 2, 2014, we issued an updated research report on
Companhia Energetica de Minas Gerais
), also known as CEMIG. Currently, we advice investors seeking
exposure in electric utilities of Brazil to avoid adding CEMIG to
their portfolio as well as investors with existing holding in
CEMIG to refrain from selling them.
BLACK HILLS COR (BKH): Free Stock Analysis
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CEMIG operates in one of the promising industries of Brazil. The
country's electricity market is the largest electricity market in
South America with an installed capacity of 121.1 thousand
Megawatts (MW) in 2012. Energy consumption in the country rose
3.5% year over year in 2013, while an annual rise of 5.9% is
expected till 2019, according to the Ministry of Mines and
Energy's (MME) 10-year plan.
In order to reap benefits from the growing demand for
electricity, CEMIG has made investments in hydro plants as well
as wind farms to improve its electricity generation capacity. The
company has also invested to improve its distribution services.
Over a period of 30 years, the company targets to capture a major
share of the Brazilian generation and distribution businesses,
thus becoming the chief player in the Brazilian electricity
Despite these bright long-term growth prospects, there exist
certain near-term concerns that might prove to be an impediment
to CEMIG's growth momentum. Potential headwinds include rising
operating expenses, governmental interference and dependence on
hydro sources for electricity.
CEMIG, in the trailing 12-months, has provided a negative return
of 3.8%, while its share price has grown over 62% in the past 5
CEMIG has an $8.6 billion market capitalization and currently
carries a Zacks Rank #2 (Buy). Some better-ranked stocks in the
electric utility industry include
CPFL Energia S.A.
Otter Tail Corporation
Black Hills Corporation
), all of which carry a Zacks Rank #1 (Strong Buy).