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Cemig Falls on Report of Low Reservoir Concern

January 07, 2013

Cia. Energetica de Minas Gerais fell to its lowest in a year as Folha de S.Paulo reported Brazil’s government is concerned that the low level of water reservoirs may lead to energy rationing.

Preferred shares of Brazil’s second-biggest electric utility by market value, known as Cemig, slumped 2.8 percent to 21.31 reais at 1:54 p.m. in Sao Paulo, the lowest on a closing basis since October 2011. The MSCI Brazil Utilities Index dropped 1.7 percent.

“If an energy rationing really happens, utilities would generate less power and consequently have smaller revenue,” Henrique Kleine, an analyst at Magliano SA in Sao Paulo, said by telephone. “This would be an extra problem for these companies, who are already facing declining income because of recent measures taken by the government to cut rates.”

President Dilma Rousseff asked power utilities to attend an emergency meeting on Jan. 9 to discuss the risk that the country’s reservoirs might fall so low that energy rationing is needed, the newspaper Folha de S.Paulo reported today, citing unnamed government officials.

A presidential press officer who asked not to be identified in accord with internal policy said by phone from Brasilia that Rousseff is on vacation and there is no such meeting on her schedule.

The Ministry of Mines and Energy said in a statement today on its website that Minister Edison Lobao will hold a monthly meeting with government officials and regulators on Jan. 9. Utility representatives may also attend, according to the statement, which didn’t mention Rousseff.

Reservoirs in northeastern Brazil were 32 percent full, on average, last month, less than the 34 percent minimum the government considers safe for the region’s dams, according to data on the national power grid operator’s website.

Rousseff announced on Sept. 11 a plan to reduce power costs by as much as 28 percent to aid households and manufacturers to boost economic growth. Changes in contracts will be negotiated with utilities as concessions on government-owned hydroelectric plants are renewed between 2015 and 2017, she said.

Cemig said on Dec. 4 it wouldn’t renew contracts to operate 18 hydro plants because the terms were unfavorable.

The company’s shares lost 38 percent from Rousseff’s announcement in September through Jan. 4. The Bovespa gained 7.1 percent during the same period.

To contact the reporter on this story: Denyse Godoy in Sao Paulo at

To contact the editor responsible for this story: David Papadopoulos at

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