Bloomberg News

Cesp Rises Most in 21 Months on Concession-Renewal Outlook

November 07, 2011

Nov. 4 (Bloomberg) -- Brazilian state-controlled power company Cia. Energetica de Sao Paulo gained the most since January 2010 on speculation the government will raise industry prices earlier than previously expected.

Cesp, as the utility is known, rose as much as 8.7 percent and was up 6.6 percent at 31.70 reais at 1:47 p.m. in Sao Paulo. It was the biggest gainer on the 68-member Bovespa index, which rose 0.2 percent. The stock is up 18 percent this year, compared to a 16 percent slide for the benchmark.

Energy Minister Edison Lobao said President Dilma Rousseff will present her position on the renewal of electricity concessions within 30 days, news service Canal Energia reported yesterday, citing a meeting of industry associations. The market consensus was for a renewal no earlier than next year, according to a report today from Marcos Severine, an analyst at Itau Unibanco Holding SA.

Lobao’s statement “will be a strong market mover for Cesp, despite the lack of information regarding the conditions for concessions renewal,” Severine wrote. He rates the company “outperform” and reaffirmed it as a “top pick.”

More than 67 percent of Cesp’s generation capacity expires in 2015, “which makes the company’s valuation the most sensitive to the concession renewal,” Severine said in his report.

Centrais Eletricas Brasileiras SA, also controlled by the Brazilian government, will benefit from the renewals to a lesser degree, Severine said. Eletrobras, as the utility is known, gained 3 percent to 24.40 reais. It’s down 8.4 percent this year.

--Editors: Glenn J. Kalinoski, Marie-France Han

To contact the reporter on this story: Alexander Cuadros in Sao Paulo at acuadros@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos in New York at papadopoulos@bloomberg.net


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