Seeking Alpha: Cemig Making Do, But Still Needs A Favorable Concession Decision

I wasn't very eager to own Brazilian utility company Cemig (NYSE:CIG) back in October of 2014 and the 13% decline in the share price since then (even with a sizable rally since March) hasn't really improved my view of the shares. Granted, Cemig shares haven't really done any worse than the iShares MSCI Brazil Index (NYSEARCA:EWZ) or fellow utilities like Copel (NYSE:ELP), Electrobras (NYSE:EBR), or AES Tiete (OTCPK:AESAY), but the company has a growing debt burden and the uncertainties over major concessions threaten an important source of incremental earnings potential.

I am still concerned that greenfield projects may not be priced to generate attractive enough returns for the long term. With that, I just don't see a lot of value in these shares today. I will note, though, that a strongly positive decision on the plant concessions could still add more than $3/ADR (at current exchange rates) to fair value and Brazilian authorities have been making more industry-friendly decisions lately. Last and not least, currency can have a big impact on the value of these shares and a strengthening of the Brazilian real could offer upside independent of the underlying fundamentals.

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Cemig Making Do, But Still Needs A Favorable Concession Decision