 Good day, fellow investors. We have already discussed one Brazilian utility, ERP, Copao, and today we'll discuss another interesting Brazilian utility. They have similar characteristics but one is more risky. Today I'll discuss Tic, Xemic, CIG, however do I have to pronounce it in Portuguese, and the company has the same characteristics but is a little bit more risky. Thus offers also higher potential reward depending on personal portfolio characteristics and risk appetite. Let's start with the company overview, a little bit of fundamentals, and the potential for the company. So CLG is a company with 121 power plants, mostly hydroelectric, some windmills, and is operating in the state of Minas Gerais. I apologize for the pronunciation, so don't think that we are talking here about small isolated companies. This company operates an area as big as France, and it is the largest integrated utility in Brazil. Distribution, second in transmission, and third in generation operates in 23 states, so it's a huge, huge company. The same as with ELP, CLG has generation, transmission, distribution, and other businesses. A lot of subsidiaries will see about that later in the discussion about the divestment program. So in 2016 net revenues, 2015 the situation was still good, then 2016 the situation got a little bit worse, lower prices, lower spot electricity prices, lower EBITDA, and first quarter 2017 the situation started to rebound, reverse itself, so EBITDA is a bit high. So we can assume that 2016 was the worst year for CLG. Also net income was severely hit in 2016 and now is already rebounding, so if there is a possibility for CLG to reach best levels 2013, 14 and 15, then the valuation will be extremely low and the potential for the stock price will be very high. What's specific about CLG is its high statutory mandatory dividend payout policy, which is set at 50%. However the current payout policy is just 25% in order for TIC to weather the storm in the Brazilian electricity sector that has hit it in the past two years due to the recession discussed in our other video. However even with the low payout ratio the dividend yield was 10.7% in 2016. The company has some issues and there are four hydro plants that are questionable for concession renewal. In this calculation the company has made projections without the concession renewals for the four plants called Jaguara, Sao Simao, Miranda and Volta Grande. However if they get some indemnity or get their concessions for the four plants above then the earnings and EBITDA will be higher. Without that happening the management projects much higher EBITDA for the next five years. At EBITDA 4 billion to 5 billion net income should be around 2 billion reals, thus around 600 million dollars. This 600 million dollars 1.2 billion shares is about 50 cents per share. Given that the price is now around 2.5 to 3 dollars it's price earnings ratio between 5 and 6, a future price earnings ratio between 5 and 6. Now the company is burdened by debt and therefore it has started disinvestment program. They are selling a lot of subsidiaries or stakes in other companies that don't really help too much. They are selling, you can see here the whole list of stakes, what are they selling and the book value is around 6 billion Brazilian reals thus 1.5 dollars per share is the divestment. So if they divest this they will get cash perhaps a special dividend so this gives a lot of safety. Of course the prices the book values are not guaranteed to be received but some will get more some will get less and there is interest for Brazilian electricity assets in Brazil also from Chinese companies. So this is also already a margin of safety. What has to be solved is this, the debt profile. Temic had a lot of debt renewals, very high interest rates, 8% real nominal almost 16% in March 2017, inflation is lower, interest rates are lower so this should be a plus for Temic and the leverage is already is above 4.2 net debt to EBITDA so that's relatively high and the management's goal is to lower it significantly and refinance the debt so that the maturity of the most of it goes to 2024. If they manage to do this they will buy a lot of time, allow for the economy to recover and really succeed in achieving the targeted profits. However the credit ratings are speculative, junk ratings for Brazil especially internationally so it is a much riskier situation than that we have seen with ELP. However the investment thesis is the following. Temic is a utility, stable business, people use electricity, they will probably manage to refinance the debt because the cash flows are constant, the divestments are also very important factor to lower the debt, lower the net debt to EBITDA so good catalysts are awaiting Temic. So if we look at the fundamentals expected future earnings equal around 2 reals per share or 0.6 per year in dollars, this if they pay out 50% of that that's a yield of 12% which is very good. Fair price of 12 with a yield of let's say 7-8% we are talking about the price above 5 dollars per share till 8-10 dollars per share as a long term target. The risk is also always the debt burden. I prefer a little bit I would be leaned towards ELP because there the earnings are already there, there's much more stability, much less debt. With CIG a lot of things have to happen and become positive to reach the price earnings ratio of 5 so it is a riskier play and the reward is not that much bigger. So I just wanted to show the comparison you make the decision of course or if you want to be invested in such a company those are two companies that give exposure to Brazil in the long term they should both do well. Temic has the divestiture, margin of safety, good earnings, long term projected earnings, energy prices have been going up in Brazil which is good for those companies and it's a really really big company so the stability of the company is necessary for the stability of the country. Thank you for watching, hope to have helped and please leave your comments below, click like if you like the content, subscribe for more and I'll see you in the next video.