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Exclusive: Brazil's Cemig to fire CEO, CFO on Wednesday, sources say
December 18, 2016 / 6:04 PM / a year ago

Exclusive: Brazil's Cemig to fire CEO, CFO on Wednesday, sources say

SAO PAULO (Reuters) - Cia Energética de Minas Gerais SA will announce the ouster of its chief executive officer and chief financial officer as early as Wednesday after the Brazilian utility’s largest shareholder balked at the slow pace of a debt-reduction plan, two people with direct knowledge of the matter said.

The board of the company, also known as Cemig, could officially announce their replacements on the same day, the sources said. The state of Minas Gerais, Cemig’s controlling shareholder, has picked former Anglo American Plc executive Paulo Castellari to replace CFO Fabiano Maia, one source said.

The sources declined to say who will replace CEO Mauro Borges, a former professor who Minas Gerais Governor Fernando Pimentel tapped to run Cemig less than two years ago. Reuters reported on Friday that tensions between Pimentel’s team and both executives escalated over the course of the electricity utility’s debt plan.

Under Borges and Maia, the company has reworked terms of some loans and sold a stake in Transmissão Aliança de Energia Elétrica SA. However, the sources said Minas Gerais officials reckoned they were too slow to proceed with the sale of Cia de Gás de Minas Gerais SA, a telecommunications subsidiary, and information technology firm Axxiom SA.

A representative for Belo Horizonte, Brazil-based Cemig did not have an immediate comment. Efforts to contact Borges, Maia and Castellari were not immediately successful.

The changes at the top underscore how Pimentel, who is facing a probe for alleged illegal campaign funding, wants to shore up a company hobbled by a legacy of underinvestment.

Analysts said Cemig’s 16.3 billion reais ($4.8 billion) of debt is becoming harder to service, threatening investments and the utility’s ability to generate revenue.

According to one source, Pimentel wants debt to be paid down faster to open the door for much-needed investments in power generation, transmission and distribution. Currently Cemig is carrying out a reorganization that includes centralizing purchases and other activities into a single platform to cut costs.

Reuters reported on Nov. 18 that Cemig was trying to sell a 45 percent stake in the Aliança Geração de Energia SA venture. Reuters reported on Sept. 16 that the company was looking for new partners for Light Energia SA.

Cemig has been the center of political and investor battles in the past. In 1999, former Minas Governor Itamar Franco wrested control of Cemig from AES Corp and Southern Co in courts by questioning the privatization process by which the firms took over the utility.

Additional reporting by Brad Haynes in São Paulo; Editing by Jeffrey Benkoe

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