We continue to remain on the sidelines with a Neutral
recommendation on Brazilian electric utility,
Companhia Paranaense de Energia
), also known as COPEL.
COPEL is one of the largest electric utilities- engaged in
generation, transmission and distribution in Brazil and currently
has a market capitalization of US$4.3 billion. It operates
primarily in the State of Parana and serves over 4.0 million
customers in 396 municipalities and 1,114 localities.
Growth in the Brazilian electric industry is on the rise as the
nation is developing fast and huge government investments are
being made to improve its infrastructure and power generation
capabilities. Also, the country will soon be hosting two major
sporting events that are likely to spur electricity
According to the Ministry of Mines and Energy's (MME) ten-year
plan till 2019, energy consumption in Brazil is expected to rise
by 5.9% annually. To leverage benefits from the apparent demand
growth, COPEL is making serious efforts to improve its generation
capabilities and improve its services. For 2013, the company has
a capital investment plan of approximately R$1,981.4 million
toward Generation and Transmission, Distribution as well as
Besides its core business, COPEL has expanded its reach in other
businesses including telecommunications, natural gas,
engineering, water, and sanitation services.
Despite these positives, the near-term concerns surrounding the
stock have kept us on the sidelines. We believe higher operating
expenses and political interference will restrict the growth
momentum for COPEL. In 2012, the company's net income slid 38%
y/y despite a 10% increase in revenue. Operating expenses grew
17%, impacting margins badly.
Other Stocks to Consider
Other stocks to watch out for in the industry are
Brookfield Infrastructure Partners L.P.
Pike Electric Corporation
), each holding a Zacks Rank #1 (Strong Buy).
BROOKFIELD INFR (BIP): Free Stock Analysis
EDISON INTL (EIX): Free Stock Analysis Report
COPEL-ADR PR B (ELP): Free Stock Analysis
PIKE ELECTRIC (PIKE): Free Stock Analysis
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