Cemig to be split into three

Brazil's Minas Gerais state-controlled power company Cemig (NYSE: CIG) will have to be split into three different companies because of the new power sector rules, newspaper Valor Economico newspaper reported. Cemig will be separated into a generation, a transmission and a distribution company. The new model says that selling energy to a unit of same company is not allowed, but even though distributors have to be distinct companies, they may have the same controllers as a generator. The model also states that distributors must operate exclusively in the sale of retail energy. According to Cemig CFO Flavio Decat, the company wants to speed up the split to be able to sell energy from new generation projects it is completing, the report said. However, Cemig will negotiate with the government over compensation for the expected 20mn reais (US$6.8mn) increase in tax expenses as a result of the split. Decat said that, overall, the new model is good, but some details need to be improved in congress. These improvements include allowing distributors to sell 95-97% of its energy in 5-year contracts instead of the 100% in the model. He also told Valor that market agents must influence the government's planning. On Friday, credit rating agency Fitch Atlantic rated Cemig as long-term national - A (bra) - because it can take advantage of its control of generation assets in a verticalized structure. Fitch also said that company's Ebitda is projectd at 2bn reais from 2004 because it can boost generation capacity in coming years. The report did not take the split into account.