Brazil's Vale, Cemig Create Joint Venture to Operate Energy Assets

   By Rogerio Jelmayer 
 

SAO PAULO--Brazilian mining company Vale SA (VALE), the world's top producer of iron ore, has agreed to form a joint venture with a unit of power company Cemig (CIG, CMIG4.BR) for the management of certain energy assets as part of the mining company's efforts to cut costs and focus on its main business.

Vale will create a company called Aliança Geração de Energia S/A jointly with Cemig Geracao e Transmissao S.A., a unit Cemig, with Vale assuming a 55% stake in the new company and Cemig controlling the remainder.

"The transaction is consistent with Vale's strategy of maximizing value for shareholders, in that it reduces capital expenditure requirements on investments related to non-core assets and increases flexibility for managing these assets in the future," Vale said.

In recent months, Vale executives highlighted the company's plans to reinforce its focus on its core businesses of iron ore, nickel, copper, coal and fertilizers. The firm is aiming to raise cash for major investments in those areas in the coming years.

The joint venture will be comprised of Vale's and Cemig's stakes in six hydroelectric power plants, with a total installed capacity of 1,158 megawatts.

Vale did not disclose the potential financial amount of the assets to be included in the new company. But Cemig, in a separate statement, said its participation in the joint venture is valued at 2.03 billion Brazilian reais ($874 million).

In a separate deal, Cemig acquired nearly half of the 9% stake that Vale holds in a company called Norte Energia S.A., which is implementing and then will operate the Belo Monte hydroelectric plant, for 206 million reais.

Write to Rogerio Jelmayer at [e-mail]

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