CESP

SÃO PAULO - Still without a solution, the privatization of CESP (CESP6), which should occur in March 2008, remains with the renewal of concessions as unfinished business and main catalyst for action. Analysts also highlighted the high indebtedness of the company and reheating of the sector as drivers for the role.

Another factor to draw attention is the payment of dividends. Although it is part of a defensive sector, the company has good track record in this regard, but analysts at Bank of America Merrill Lynch they see good prospects for 2010, which could ensure support for the stock.

Power sector
Although not shown excellent performance in 2009, and bearing in mind that this is a defensive sector, companies had a better than average compared to other sectors, although below the Bovespa index. The IEE (Electric Power Index) rose 59%, while the Bovespa index has appreciated 82.6% over the year.

For Andres Kikuchi, an analyst with Link Investments, this limited impact is due to diversification of the sales mix. "In the case of generators, it was through the FTA - Free Contracting Environment and ACR - Regulated Contracting Environment.

These two environments are considered energy, one aimed at the consumer free, and the second where the energy companies hire through public auctions conducted by ANEEL (National Agency of Electrical Energy) and CCEE (Chamber of Electric Energy Commercialization ).

Demand and consumption
Besides the economic downturn, the drop in spot prices by the high rainfall and lower energy demand negatively affected the performance of business in 2009. Assessment is Renato Mauricio Pinto, and Vicente Falanga Neto, analysts at Banco Fator brokerage.

But while demand has shown a major industrial, commercial demand remained strong and in operational terms the result was also positive. In 2010, we expect recovery in volumes of the two segments (industrial and commercial).

According to the EPE (Energy Research Company), the expectation for 2010 is growth of 9.4% against the consumption recorded in 2009, reaching 455.2 thousand gigawatt-hours of consumption. The outlook for the long term are also positive, with growth forecast to average 5.2% per year between 2010 and 2018.

Regulatory issues and concesões
The biggest sector risk is linked to regulatory issues. "The year 2009 was marked by uncertainties, especially major renovations to the concessions of generation projects," says analyst Factor.

In March 2008, the auction for privatization of CESP was suspended, and remains unresolved to this day. "The government intends to resolve the imbroglio soon, but the election year should be the great limiter," he said.

Kikuchi also mentions the issue of empowerment as a major theme in the industry, and believes that all segments of the industry will be affected by the renewal of concessions maturing in 2015, but the CESP should be impaired in particular as it was 67% of the industrial park in the process of renewal.

The factor analyst explains that "the question of the franchise is more related to the search for low tariffs as the price of long-term power is up, than the question of cancellation and later rebid the current leases.

Furthermore, he notes that the matter may be pending for longer if the rates offered are too low.The analyst also sees the CESP, along with Eletrobras, as those who generate the most vulnerable in the matter of concessions

CESP
Analysts agree that the issue of concessions is the main catalyst for the shares of CESP. And for the analyst Factor, there will still be mismatched data in this regard by the federal government.

Kikuchi bet that if the concessions do not occur in the first quarter, hardly take place in 2010, precisely because of the elections.

Analysts at Bank of America Merrill Lynch they see a positive scenario for the CESP, which in view of the bank may have privatiazação process resumed after the elections. Whereas a victory of the PSDB in state and federal, analysts believe most investors' confidence since the law CESP would be entitled to renew their leases in the event of privatization.

A team of bank credits the failure of last attempt to resistance from the federal government, which would not occur in the case of a possible victory of the PSDB, as the party candidates would be more "pro-privatization."

But beyond the issue of licensing, there is another matter of concern: the contingencies, amounting to R $ 1.23 billion. For the team of BofA Merrill Lynch, this is one of the main risks of the paper. The vision is shared by analysts Factor and Link.

A key indicator of leverage is the ratio of net debt and equity. In the case of CESP, the ratio stood at 28.2% in 2008, and based on projections of results of the factor should be at 26.8% in 2009 and 17.6% in 2010, which shows a perspective of reducing Profile of debt in the coming years.

Still, the number is still much higher than competitors. To get an idea, Eletrobrás has negative projection of the same net debt and shareholders' equity of -0.7%, and in 2008 the number was 0.5%. Copel, serving the Parana, are projection of 5.2% for 2009 and 1.2% for 2010, well below the numbers of CESP.

In addition, the factor analyst believes that despite the good scenario for the industry in general, the generators, such as Cesp have less upside potential, since they have fixed contracts and were not as affected by reduced consumption 2009, as occurred with the distributors.

Possible consolidation in the sector
Both the analyst and the Link Factor believe in the possibility of industry consolidation. For Ricardo Pinto, it can be accelerated depending on the output of foreign groups such as Endesa (parent Coelce and Wide) and Duke Energy, which controls the generation Paranapanema.

Another Possibility is a fusion of the Network with other companies.

"The fall in interest rates, low corporate debt and the new round of tariff revision creates an environment conducive to the acceleration of activity in mergers and acquisitions, especially in the distribution market," explains the analyst. 

Eletrobrás

SÃO PAULO - On a day bad for stock markets around the world, including Singapore, shares of Eletrobrás (ELET3, ELET6) ended the trading session on Thursday (21) rise sharply under the influence of the flow of news involving the company name. Papers ordinary closed the session with a high of 4.09%, at R $ 38.20, while the Class B preferred shares registered an increase of 2.59%, at R $ 31.66.

The company announced on Wednesday that study, along with the federal government, carrying out a subscription of shares to raise capital to repay debt incurred with its shareholders. The state owes about $ 10 billion related to dividends retained in the 1970 and 1980. On Thursday, the Minister Edison Lobao announced that the government is studying a market capitalization of the company, proposed by the BNDES, and make a decision until January 31.

"It's an ongoing process to adjust Eletrobrás finances and pay dividends," said the executive secretary of the Ministry of Finance, Nelson Machado. According to technicians, the capitalization is necessary for the company to continue making investments, especially in works included in the PAC (Program to Accelerate Growth), after payment of dividends.

Press
In a statement sent to the market, the company itself clarified that there is an ongoing study with the controlling shareholder, ie the government, pursuing a way to settle the dividend.

"In this study are being considered all possible options, including the option of discharge of the reserve together with a simultaneous operation of capital increase, in which investors could subscribe for additional shares with proceeds from the dividend reserves" returned Eletrobrás.