Moody's ups Cemig outlook to positive

Moody's America Latina said it changed the outlook on the B1 global local-currency and Baa2.br Brazilian national scale debt ratings of Brazil-based Companhia Energetica de Minas Gerais-Cemig to positive from stable.

The change in outlook was prompted by the improved corporate governance of Cemig and its overall improved credit metrics on a consolidated basis as a result of the company's stronger cash generation, improved debt maturity profile and strengthened liquidity position, the agency said.

Taking opportunity of the favorable market conditions including tariffs adjustments and recovery in demand for electric energy in its concession territory, Cemig has replaced a substantial amount of short-term debt with longer-term financing, while simultaneously increasing its cash position. The agency said the strengthened financial flexibility is evidenced by the company's R$1.344 million cash position at Dec. 31, equivalent to 112% of short-term adjusted debt.

The ratings are constrained by the uncertainties related to the evolving regulatory environment for Brazil's electricity sector. Moody's said it recognizes that, in general, the new Brazilian regulatory framework for the energy sector provides a more stable environment for the industry players, but there are still significant uncertainties regarding the new regulation essentially related to the lack of track record for the execution of guarantees within the regulated market and the substantial interference powers of the Federal Government.

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