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Companhia Paranaense De Energia (ELP): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

By: Zacks.com
Posted: 11/28/2013 7:00:00 AM
Referenced Stocks: ELP

Summary:
Long-term prospects for COPEL are bright. The company, in order to capitalize on the growing electricity demand in Brazil, is keen on improving its generation capacity. In this regard, the acquisition of 49% stake in Voltalia's wind farm complex is worth mentioning. However, despite these long-term positives, COPEL's disappointing performance in second-quarter 2014 has forced us to downgrade our recommendation to Underperform from Neutral. The company's earnings declined 1.3% year over year as top-line growth of 45% was more than offset by 56% increase in operating costs and expenses. Also, huge debt levels pose a threat to COPEL's growth. Moreover, being a state-owned company, governmental interference causes delay in the execution of its regular operations.

Overview:

Companhia Paranaense de Energia (ELP), also known as COPEL, is a fully integrated electric utility in Brazil. The company is engaged in the generation, transmission and distribution of electricity in the state of Paran . The provincial government of the state controls about 58.6% of the shares of COPEL. The company directly serves approximately 4.3 million customers in 395 municipalities and 1,113 localities.

COPEL has roughly 5,454 megawatt (MW) of generating capacity, 99% of which is hydroelectric. The company owns 20 power plants, including 18 hydroelectric, 1 thermal and 1 wind plant. Moreover, it has interests in as many as ten power generation companies. COPEL also provides telecommunications, natural gas, engineering, water and sanitation services.

COPEL operates primarily through its five subsidiaries, including Copel Gera o e Transmiss o (GeT deals with generation and transmission of electricity), Copel Distribui o (DIS deals with distribution of electricity), Copel Telecom (TEL deals with the telecommunication business), Copel Participa es (manages the company's interests in special purpose entities in the energy, gas, telecommunication, sanitation and service sectors) and Copel Renov veis (deals with the company's investments in renewable energy generation projects).


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