We recently reiterated our Neutral recommendation on Brazilian
Companhia Paranaense de Energia
), also known as COPEL.
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COPEL generates, transmits, and distributes electricity,
primarily in the State of Parana and directly serves
approximately 4.0 million customers in 396 municipalities and
1,114 localities. Besides its core business, the company has
expanded its reach in other businesses including
telecommunications, natural gas, engineering, water, and
Recovery in the global economy seems to be inducing growth in
many emerging nations and, Brazil is one of them. The country is
developing fast and huge government investments are being made to
improve its infrastructure and power generation capabilities.
According to the International Monetary Fund (IMF), the country
is expected to grow 3.5% in 2013 and 4.0% in 2014.
Upcoming sporting events to be held in Brazil, rising government
spending to improve the country's infrastructure, growing demand
for modernised machinery - all these bode well for the electric
industry of the country. 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.
COPEL is expanding its generation capacity to leverage benefits
from the growing electricity demand. The company has sanctioned
roughly R$1,964.1 million to improve its Generation and
Transmission, Distribution as well as Telecommunications
On the flip side, some near-term concerns have forced us to
remain on the sidelines for COPEL. Rising operating expenses and
higher liabilities are the prime headwinds for growth. Moreover,
being a state-owned company, political interference and
unfavorable regulatory systems influence COPEL's decision making
to a great extent.
Other Stocks to Consider
Other stocks to watch out for in the industry are
Brookfield Infrastructure Partners L.P.
Pike Electric Corporation
Otter Tail Corporation
), each holding a Zacks Rank #1 (Strong Buy).