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UPDATE 1-Brazil's Cemig sees need for asset sales to ease debt burden
April 12, 2017 / 8:22 PM / 3 months ago

UPDATE 1-Brazil's Cemig sees need for asset sales to ease debt burden

3 Min Read

(Adds details, share performance, comments throughout)

By Luciano Costa and Guillermo Parra-Bernal

SAO PAULO, April 12 (Reuters) - Cia Energética de Minas Gerais SA will speed up efforts to renegotiate loans and divest electricity generation, transmission and distribution assets, as Brazil's No. 3 power utility faces 8.7 billion reais ($2.8 billion) worth of debt maturities by the end of next year.

Cemig, as the utility is known, will reduce capital spending for this year after last year incurring large licensing payments for several hydropower dams, Chief Financial Officer Adézio Lima said at a conference call to discuss fourth-quarter results.

The utility, controlled by Brazil's Minas Gerais state, is exiting some segments while revamping power generation, renewable energy and transmission operations. Its debt has tripled to 13.1 billion reais since 2012, when a federal government decision to renegotiate power contracts brought about a decline in the value of electricity assets and hampered project returns.

Eighty percent of Cemig's debt comes due by 2019. Reuters reported in March that Minas Gerais wants Cemig to cut debt by selling majority stakes in generation, transmission and distribution units, and exiting most of the 26 percent direct stake it has in Light SA.

A combination of softer debt repayment terms and proceeds from asset sales should help bolster its credit situation in coming quarters, Lima said. A sale of Light shares is under analysis, while talks with an unidentified bidder to exit a stake in the Santo Antonio dam remain on track, Lima said, disputing news reports that they had collapsed.

"We have a divestiture plan that the board approved in March," Lima said, without elaborating.

However, Cemig's divestiture plans are taking longer than those of rivals, underscoring the difficulties of downsizing a company that grew too big, too fast in recent years. Many Cemig's takeovers in recent years, spanning the telecommunications to gas distribution sectors, have delivered subpar returns.

Cemig lost 299 million reais in the fourth quarter, compared with a profit of 566 million reais the year earlier. Brazil's harshest recession on record stoked delinquencies and laid bare operational inefficiencies that weighed down Cemig's revenue in the quarter.

Preferred shares, Cemig's most widely traded class of stock, dropped the most in three weeks on Wednesday, shedding as much as 5.5 percent. Expectations of faster asset sales have bolstered the stock 24 percent this year.

$1 = 3.1500 reais Editing by Andrew Hay and Steve Orlofsky

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