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Cesp Drops to 3-Year Low as Net Misses Estimate

November 12, 2012

Cia. Energetica de Sao Paulo, Brazil’s second largest power generator, fell to the lowest in more than three years after earnings missed analysts’ estimates.

Cesp, as the Sao Paulo-based utility is known, slumped 6.5 percent to 16.05 reais, the lowest closing price since May 11, 2009. The shares are down 51 percent this year, compared with a 0.5 percent gain on the benchmark Bovespa index.

Cesp reported third-quarter net income of 149.6 million reais ($73 million) excluding some items after markets closed on Nov. 9, short of an estimated 162.5 million reais, the average of six analysts’ estimates compiled by Bloomberg.

“The bottom line fell slightly short of our estimate,” Banco Itau SA analysts Marcos Severine and Mariana Coelho said in a report to clients today. “Lower average energy prices in both the regulated and free markets” pared sales, they said.

Brazilian utilities have tumbled this year after President Dilma Rousseff in September announced a plan to reduce electricity rates by as much as 28 as the government seeks to cut costs for manufacturers to make them more competitive. The package announced by Rousseff will reduce prices as part of renewals for concessions set to expire in 2015 and 2017.

Cesp’s decline this year makes it the sixth-worst performer on the 818-member MSCI Emerging Market Index this year. Centrais Eletricas Brasileiras SA (ELET6), or Eletrobras, and Eletropaulo Metropolitana Eletricidade de Sao Paulo SA, Brazil’s largest distributor, are also among the 10 worst performers on the index this year.

To contact the reporter on this story: Rodrigo Orihuela in Rio de Janeiro at

To contact the editor responsible for this story: James Attwood at

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